ArmInfo. The Central Bank of Armenia predicts for 2020 a significant decrease in the inflow of private transfers by 22-25%, which, compared with the March forecast of a decline of 16-19%, indicates a significant deterioration in expectations. This is stated in the Central Bank's monetary policy program for the Q2 of 2020, published on June 30, where the forecast for Armenia's GDP for 2020 is revised downward by 4%, against a previously projected slowdown to stagnant 0.7%. The Central Bank causes the deterioration of the forecast for money transfers of individuals by a significant recession in the Russian economy in the conditions 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 official Russian estimates: the Central Bank of the Russian Federation expects a drop in Russian GDP in 2020 in the range of 4-6%, the Ministry of Economic Development of the Russian Federation - by 5%. At the same time, the IMF and the WB in their June forecast expect a more serious decline in Russia's GDP in 2020: according to the IMF, the decline will be 6.6% (against the previously forecasted decline of 5.5% in April), and the WB expects a decline of 6% ( against a previously predicted decline of 1%). The deterioration in the International Monetary Fund's estimates of the global economic decline (up to a 4.9% decline) and Russia's GDP in 2020 will deepen the negative outlook for Armenia's GDP (from the 1.5% fall in the April IMF forecast - Ed. note). The WB in its June forecast, already worsened expectations for Armenia's GDP in the direction of a 2.8% decline. The WB's June forecast notes that in the Europe and Central Asia (ECA) region, GDP is expected to decline by 4.7% amid a pandemic and related disruptions in services and supply chains. This impact is expected by the WB to be most severe in countries that are highly dependent on tourism and commodity exports, capital inflows, and those that are deeply integrated into global value chains. The risk of a full-fledged financial crisis, according to the WB forecast, may weaken the influx of foreign direct investment and remittances, the last of which will be caused by rising unemployment in host countries such as the Eurozone, the economy of which the WB forecasts a decline of 9.1% in 2020. WB notes that recession in ECA is likely to have a particularly serious impact on informal and temporary workers.
But in 2020, the coronavirus pandemic and related restrictive measures led to a significant decline in the rate of private transfers. Thus, in January-April 2020, the inflow of transfers from Russia to Armenia dropped by 27.1% per annum, with a 0.6% growth in the same period of 2019. The dynamics of the outflow of transfers from Armenia to the Russian Federation also declined by 30.3% , against the 16.6% growth a year earlier. This accelerated the y-o-y decline in the net inflow of transfers from Russia to 23% in January-April 2020 from 14.5% in January-April 2019. The deterioration of the dynamics is observed for transfers in the direction of the United States. In particular, the y- o-y growth in inflows from the USA sharply slowed down to a stagnant 0.1% in January- April 2020 from 35.8% in the same period of 2019, with the outflow trend in the USA reversing from 15.5% growth to 38, 2% decline. As a result, in January-April 2020, the inflow of transfers from the United States amounted to $ 81.9 million, and the outflow of $ 46.1 million, forming a net inflow of $ 35.8 million (with a 5-fold y-o-y growth). In total, the inflow of transfers of individuals to Armenia turned the annual dynamics in January-April 2020 towards a 17.1% decline from a 10.8% growth in the same period of 2019. The same trend deterioration was observed for the outflow of transfers - a reversal from 8.1% growth to a 16.5% decline. As a result, the y-o-y dynamics of the net inflow of transfers turned from 19.1% growth in January-April 2019 towards a 18.7% decline in January-April 2020.
In January-April 2020 (April compared to December), the inflow of transfers of individuals to Armenia decreased by 58%, and in April alone they fell by 23%, while a year earlier the four-month decline of 17% was accompanied by April growth of 9.2% . A similar downward trend was demonstrated by the outflow - by 57% for four months with the April decline by 29%, against last year's 10.5% decline for four months with the April 19.8% increase. In the structure of the inflow, a four-month decline in transfers from Russia by 69% was accompanied by an April decline of 33.3%, with a similar downward trend in outflows - by 68.3% for 4 months and 43.1% for April. While the decline in the inflow of transfers from the United States for four months by 37% and in April alone by 20% was accompanied by a four-month increase in outflows by 1.8% with the April decline by 35%. As a result, the net inflow of transfers from Russia was in decline both in four months (69.4%) and in April (11%), while from the USA it was in decline in 4 months - by 60.4% with April growth by 25%.
According to the RA Statistical Committee, Armenia's GDP growth accelerated in 2019 to 7.6% from 5.2% in 2018, amounting to 6.6 trillion drams ($ 13.7 billion). The GDP deflator index in 2019 amounted to 101.5%, against 102.8% in 2018. But the coronavirus pandemic, which appeared at the beginning of 2020, made negative adjustments to economic development, and the measures taken to prevent the spread of the epidemic with the accompanying temporary ban from March 16 on many types of economic activity, lifted only from May 18, did not have the best effect on the country's economic prospects. So, according to the results of January-May 2020, economic activity in Armenia decreased by 3.9% per annum, and only the energy complex and industrial sector remained in growth, but weak one, while the rest of the field deepened into recession, trade, the services and the construction sector were particularly noticeable in decline, which was observed against the background of an accelerating decline in imports and exports (respectively by 12.8% and 8.1%). However, the complete lifting of the ban from May 18 allowed all sectors to grow in May, which in turn increased economic activity for the reporting month by 13.3%, after the April recession by 12.9%. Moreover, the most significant growth in May 2020 was observed in the construction sector (3.1-fold after a decline of 40.6% in April), trade (by 33.3% after a decline of 29.4% in April) and the industrial sector ( by 11.9% after a decline of 9.2% in April). In May, even the services sector grew - 0.8% (after the April decline by 11.2%), which was most affected by anti-epidemiological restrictive measures and has not yet fully resumed operation of all segments.
