Tuesday, December 29 2020 22:15
Karine Melikyan

Central Bank downgrades forecast for GDP decline in Armenia in 2020  to 7.2% from previous 6.2%

Central Bank downgrades forecast for GDP decline in Armenia in 2020  to 7.2% from previous 6.2%

ArmInfo.The Central Bank further worsened the forecast for the decline in Armenia's GDP in 2020 - to 7.2% from the previous 6.2%. This is set out in the Central  Bank's Monetary Policy Program for the Q4 of 2020, published on  December 29.  According to the Central Bank's forecast, in these  conditions, the decline in private demand will amount to 10.1%,  including private consumption will decrease by 9.3% (against the  previously expected decline by 9.4%), and the gross accumulation of  private fixed assets will decrease by 15.3%.

 In the forecast horizon, the Central Bank expects a slow recovery of economic  activity, mainly due to private spending, but an assessment of the  current situation shows that GDP growth will be lower than the 5%  previously predicted for the long term due to the negative impact of  the military actions in Artsakh and the accumulated uncertainties. In  2021, the state budget and exports will have a negative impact on GDP  growth, but in the medium term, their impact will be positive.  The  ratio of the current account deficit to GDP, according to the updated  forecast of the Central Bank, in 2020 will be 5% (against the  previously expected 5.5%), and in 2021 it will increase to 7-8%, with  a gradual decrease in the medium term to 3-5%. The Central Bank  expects a more tangible decline in exports in 2020 than previously  predicted (29-32% was expected in both exports and imports) due to a  decrease in export volumes of gold and copper concentrate. For 2021,  the Central Bank predicts export growth in the range of 4-6%. And  although the recovery in global demand will accelerate to some extent  in 2021, slow growth will be driven by low tourist traffic. Tourism  will remain the most affected sector, and despite the positive news  about the use of the coronavirus vaccine, tourists will be cautious  for now.

The recovery of external tourism in Armenia is expected in the third  quarter of 2021, but at a slower pace than global tourism, given the  medium-term negative impact of martial law. The growth of imports in  2021, according to forecasts of the Central Bank, will be in the  range of 7-9%.  With regard to remittances of individuals, the  Central Bank predicts that, after an unprecedented increase in the  volume of private transfers from the United States and other  countries (of an "altruistic" nature) in 2020, they will decrease in  2021, and remittances from Russia will recover to some extent, due to  the expected economic activity and a certain restoration of the flow  of labor migrants. Under these conditions, the net inflow of private  transfers to Armenia, according to the forecasts of the Central Bank  of Armenia, will decrease by 4-6% in 2021 (against a decline of  19-22% predicted for 2020).  According to forecasts of the Central  Bank, the share of government debt in GDP will increase by 11.6% in  2020 and will reach 61.5%.

In 2020, amid a tangible decline in GDP and declared martial law, the  unemployment rate will rise to 19%, with a further rise in 2021 to  20%, the Central Bank of Armenia predicts. The gradual growth of this  indicator by the Central Bank is due to the fact that in 2020 many  enterprises, thanks to state support, preferred, in the face of a  deep recession in demand, to reduce working hours, while retaining  the staff. And in 2021, the expected completion of these state  support programs and the presence of uncertainties will lead to an  increase in unemployment. In the medium term, in parallel with the  recovery of economic activity, the unemployment rate will decline by  0.4-0.5 percentage points annually, approaching 19% by the end of the  forecast period.  To note, according to the updated in October this  year of the World Bank's forecast for 2020, Armenia's GDP is expected  to decline by 6.3%, against the previously expected 2.8% and actual  7.6% growth in 2019.  In 2021, the WB expects Armenia's GDP to grow  by 4.6%. In its November forecast, the IMF expected Armenia's GDP to  fall by more than 7% in 2020, with modest growth in 2021. According  to the Statistical Committee of the Republic of Armenia, the decline  in economic activity in January-November 2020 has already deepened to  7.2% per annum, and in November alone the decline was 10.2%, and  almost the same decline was recorded in comparison with November  2019-10.3%.


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