ArmInfo.The International Monetary Fund (IMF) predicts a decline in GDP of more than 7% in Armenia in 2020, with a modest growth in 2021. This is stated in the press release of the IMF, in which, in addition to information on the third revision of the Stand-by loan for Armenia, the head of the IMF delegation in Armenia Nathan Porter also provides updated forecast indicators.
"Armenia's economy has been hard hit by the COVID-19 pandemic and the worst military confrontation since the early-1990s and is set to contract in 2020. These shocks have created domestic demand and supply disruptions and have been exacerbated by a sharp decline in export and tourism revenues, remittances, and to some extent, weaker capital flows. Real GDP is now expected to decline by over 7 percent in 2020. While uncertainty about the recovery is high, growth is projected to remain modest in 2021 and then pick-up as the economy gradually adapts to, and moves past, the impact of these shocks and associated economic scarring. Over the medium term, inflation should rise and gradually converge to its target from below (4%+/-1.5 ed.note). Near-term downside risks associated with external developments, an uncertain economic and political environment, elevated regional tensions, and the intensity and duration of the pandemic, are balanced against potential upsides from a faster recovery from the pandemic, more limited scarring, and faster reform implementation.
"Lower revenues and higher spending on healthcare, socio-economic support, and security will significantly raise the fiscal deficit and public debt in 2020. The fiscal deficit in 2020 is expected to widen to AMD430 billion (7 percent of GDP) before narrowing to AMD355 billion (5? percent of GDP) next year. The budget will be financed by mobilizing resources from domestic and external sources, including development partners. Government debt is expected to exceed 60 percent of GDP in 2020 and rise to around 69 percent in 2021. Staff welcomes the authorities' strong commitment to fiscal sustainability, guided by their fiscal rule, despite the pressures they are facing. To this end, the authorities will intensify revenue mobilization efforts, undertaking tax policy and administration measures, while containing current spending and safeguarding priority spending. As a result, central government debt is expected to gradually decline over the medium term and fall below 60 percent of GDP by 2026''.
To note, in its previous forecast IMF predicted national debt above 60% of GDP, and an increase in the state budget deficit to almost 5% of GDP. According to the October forecast of the World Bank for 2020, the decline in Armenia's GDP will be 6.3%, against the previously expected 2.8% and actual 7.6% growth in 2019. According to the Statistical Committee of the Republic of Armenia, economic activity in Armenia in January-September 2020 deepened into recession - up to 6.6%, against the background of rapidly decreasing volumes of exports and imports - by 4.4% and 13.7%, respectively. The industries that previously acted as drivers of economic growth are now in decline amid the coronavirus crisis and martial law due to the hostilities in the zone of the Nagorno-Karabakh conflict. So, in January-September 2020, the only fields that remained in growth were the industrial sector, the agricultural sector and the energy complex - 1%, 0.5% and 1.5% per annum, respectively. And the rest of the industries showed a serious decline: construction - by 15.7%, trade - 11.4%, services - by 11.7%.
