Wednesday, December 25 2019 13:39
Karine Melikyan

Central Bank improves forecast for Armenia`s GDP growth in 2019 to  7-7.3% from the previous 6.7-7.2%

Central Bank improves forecast for Armenia`s GDP growth in 2019 to  7-7.3% from the previous 6.7-7.2%

ArmInfo.The Central Bank of Armenia has improved its forecast for GDP growth for 2019 to 7-7.3% (7.2% on average) from the previous 6.7-7.2% (6.9% on average). As  set out in the Central Bank's monetary policy program for the Q4 of  2019, published at the end of December, this is largely determined by  domestic demand, especially by a high level of private expenses.  Namely, it is noted that, given the growth of private consumption by  11.4% and the increase in gross fixed assets of the private sector by  1.2%, private spending will increase by 9.9%.

According to the Central Bank, in the medium term, in parallel with  accelerating global economic growth and reducing global uncertainty,  private investment will increase stimulating economic growth.

According to forecasts by the Central Bank, in 2020 the demand  structure will change a bit and real growth in private consumption  and imports will slow down, mainly due to a decrease in car imports,  but the stimulating effect of exports on economic growth will  intensify. In the short term, weak inflationary pressure will come  from the real sector, the neutralization of which is expected at the  end of the forecast period in the context of the current monetary  policy.

The Central Bank improved its forecast for both import growth for  2019 to 4-6% from the previous 1-3%, and export growth to 9-11% from  the previous 5-7%. The Central Bank further worsened the forecast for  an increase in net inflow of remittances for 2019 - to 0-2% (against  the previous forecast range of 1-3%). For 2020, the Central Bank  predicts a recovery in the growth rate of money transfers by  individuals to 7-9% due to the positive growth trends in the Russian  economy. In export in 2020, the Central Bank expects a slowdown in  growth to 6-8%, and in imports - declining rates to 0-3%.

With such a development of the economy and foreign trade, the ratio  of the current account deficit to GDP will be 7-8% in 2019, which  repeats the previous forecast of the Central Bank, and in 2020 it  will decrease to 4-6%. In the medium term, as previously predicted,  due to the progressive growth of exports, it will stabilize in the  range of 3-5%.

The Central Bank, given the downward trend in unemployment since  2019, revised its forecast for this indicator, expecting 18.9%, and  taking into account the subsequent annual decline in the medium term  by 0.2-0.5 percentage points, the level of 17.3% is possible. Nominal  wages in the private sector will increase by 3.9% in 2019, and in  2020, due to an increase in the minimum wage threshold, the growth  will amount to 8.1%.

To note, according to the updated this December World Bank forecast  for 2019, GDP growth in Armenia will be 6.9%, compared to previously  projected 5.5%. The state budget of the Republic of Armenia for 2019  contains a growth of GDP of 4.9%, but according to the expectations  of the government, GDP growth will be about 7%. According to the IMF  forecast, Armenia's GDP growth in 2019 will be 4.6%.  According to  the Central Bank of Armenia, the inflow of transfers of individuals  to Armenia slowed down the growth in 2018 to 1.7% from 14.6% in 2017,  amounting to $ 1.786 billion. At the same time, the growth rate of  the outflow of transfers slowed slightly - from 21.2% in 2017 to 20,  1% in 2018, amounting to $ 1.188 billion. This worsened the dynamics  of the net inflow of transfers from 7.1% growth in 2017 to 22.1%  decline in 2018, forming at the level of $ 597.2 million. Russia's  share in the inflow decreased in 2018 from 60.6% to 58.8%, and in  outflow, on the contrary, increased from 38% to 39.7%.

According to the RA Statistical Committee, in 2018, the GDP growth of  Armenia slowed down to 5.2% from 7.5% in 2017, amounting to 6.005  trillion drams ($ 12.4 billion). The GDP deflator index in 2018  amounted to 102.5%, against 102.1% in 2017. The service sector, the  trade sector and the industrial sector dominate in terms of volume,  but only the service sector remained in terms of growth in drivers.  According to the results of January-October 2019, economic activity  in Armenia increased by 7.1% per annum and the services sector  (15.1%), trade (8.9%) and the industrial sector (8.8%) acted as   growth drivers.

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