ArmInfo. The new forecast of the Central Bank of Armenia indicates a 4% drop in GDP in 2020 with a 5.5% increase in 2021. This is stated in the Central Bank's monetary policy program for the Q2 of 2020, published today, in connection with which the Head of the Central Bank, Martin Galstyan, convened a press conference.
The Central Bank predicts that the spread of coronavirus (COVID-19) and the tough measures taken to prevent the spread of the pandemic will significantly suppress economic activity in 2020. According to the expectations of the Central Bank, the negative impact of measures to prevent the spread of the coronavirus pandemic will affect all sectors of the economy, but the most vulnerable are tourism and entertainment and segments closely related to them. The extremely high uncertainty in the development of the pandemic situation remains a priority risk, on which economic activity, the structure of the economy and the potential for further development of the economy will depend significantly. This year, according to the updated forecast of the Central Bank, the construction sector will decline - by 11.2%, the services sector - by 4.3%, the industrial sector - by 2.2%, and the agricultural sector - by 0.4%. In 2021, the Central Bank's current forecast portends growth in these areas: the construction sector - by 9.3%, the industrial sector - by 6.1%, the services sector - by 5%, the agricultural sector - by 4.2%.
According to the Central Bank forecast, private consumption will decrease by 6.3% in 2020, and the total accumulation of private fixed assets by 14.7%.
On foreign trade, the Central Bank's new forecasts for 2020 are more pessimistic, in particular, imports are expected to fall by 15-17% (against actual growth in 2019 by 9.1%) and exports by 12-15% (against actual growth in 2019 by 10.3%), which will have a negative impact on real GDP. This is due to a reduction in global economic demand, and measures taken in the countries-trading partners of Armenia to prevent the spread of the coronavirus pandemic.
According to the new forecast of the Central Bank, a more significant reduction in the money transfers of individuals in 2020 is expected: 22-25% (against the actual 9.7% increase in the inflow of transfers in 2019, moreover, from Russia - with the trend coming out of the recession by ascending 0.6% ), due to the significant recession of the Russian economy in the context of a sharp decline in oil prices. In parallel, a temporary ban on entry into the country, introduced by Russia as part of measures to prevent the spread of the coronavirus pandemic, will have a significant impact on the decline in remittances. But the CBA notes that in contrast to previous years in 2020, the impact of the decline in remittances on GDP decreased incomparably. It is worth noting that, according to the Central Bank of the Republic of Armenia, for 2019, the share of Russia in the structure of the inflow of transfers of individuals decreased from 59% to 54%.
Under these conditions, the ratio of the current account deficit to GDP will be in the range of 6-7% in 2020, and in the medium term, with the progressive growth of exports, this indicator will gradually approach a balanced level in the range of 3-5%.
As for unemployment, the updated forecast of the Central Bank expects a level of 20.4% in 2020. In the medium term, in the context of a slow economic recovery, the Central Bank expects a y-o-y reduction in unemployment by 0.3-0.5 percentage points, approaching by the end of the period to 19.6% (against the previously expected 17.3% after a y-o-y decline of 0, 8-1.2 pp). The growth of nominal wages in the private sector in 2020 will slow slightly - to 6.8%, with a slowdown in 2021 to 6.4%, and at the end of the forecasted period it will stabilize near 7.1%.
To note, according to the World Bank forecast updated at the beginning of June for 2020 GDP in Armenia is expected to decline by 2.8%. The IMF in its April forecast expected a 1.5% drop in Armenia's GDP in 2020 (there is no updated version yet), but the IMF's deteriorating estimates of the global economy and Russia's GDP in June will deepen the negative forecast for Armenia's GDP.
