ArmInfo.Despite the imbalances and risks that create some additional difficulties, Armenia's banking system in the presence of a significant capital adequacy buffer and excessive liquidity, will continue to function stably in the medium term under any scenarios of the development of the coronavirus crisis.
This is stated in the next "industrial review" of the banking system of Armenia, prepared by the experts of the AmRating national rating agency in cooperation with the Rating-Agentur Expert RA GmbH European rating agency.
According to the agency's analysts, first of all the government itself acts as support measures and guarantees of stability, seriously supporting banks in the implementation of anti-crisis measures, the resources of the IMF and other donor organizations are also considered. It is possible that shifting from tough monetary measures towards direct anti-crisis resource intervention of the state in the economy will help prevent collapse in GDP in the medium term, as was recorded during the 2009 financial and economic crisis, when the economic recession reached 15%.
Most likely, Armenia in 2020 will be able to avoid falling into a state of economic depression, there is no reason for stagflation either. The country is likely to enter a mid-term recession phase, accompanied by a 4- 5% decline in GDP, sluggish business activity and a modest rise in unemployment. This will be an inevitable period of adaptation to new living conditions and preparation for recovery by mid-2021. But this scenario is possible unless the country faces a second, even harder wave of the coronavirus epidemic, which will force the government to again resort to a regime of severe restrictions and even a lockdown.
According to AmRating experts, it is also possible that, in case of recovery of external demand, by the Q4 there will be some recovery in corporate lending due to the activation of state infrastructure projects, and SMEs support programs. Banks have already begun to seriously facilitate their technological development and, according to various estimates, in the near future up to 70% of the clientele will be forced to work in conditions of remote access to the range of financial services and instruments, which will significantly increase the share of bank non-interest income and reduce operating costs.
The increase in bank reserves against the background of growth in NPL (non-performing loans) will slightly reduce the level of profitability of banks, on the one hand, but on the other hand, it will also reduce the unjustified appetite for risk in the already overheated retail segment. Banks will have to temporarily increase their trading portfolios, seriously get involved in the implementation of preferential government programs to support SMEs, master the art of project financing and seriously engage in their further technological development.
The decisiveness of the Armenian government, despite the pandemic and the difficult internal political situation, to continue the policy of supporting the real sector of the economy through a serious fight against corruption, ensuring equal competitive conditions for entrepreneurship, diversifying the economy and its export potential gives hope for a gradual recovery in the medium term of economic potential and structural changes in the economy as a whole.
It is still difficult to assess the domestic political risks associated with a possible return to the past, but the new government of Armenia, despite the "revanchist information hysteria" and the unsatisfactory pace of carrying out radical reforms, still enjoys a high credit of public confidence and, most likely, in the absence of external or other kind of force majeure, will be able to overcome the remaining three-year period of the political cycle, the review reads.
https://raexpert.eu/files/Industry_report_Armenia_Banks_21.05.2020.pdf
Armenian Banks: About HSBC, Ardshinbank and Conducting Business in the New Environment of Sanction Restrictions
The sale of HSBC Bank Armenia to Ardshinbank to be completed on November 29, 2024
Armenian government approves 2024-2040 demographic strategy 
Armenia`s economy and state competing for sooner collapse - ex-official