ArmInfo.The World Bank's forecast for GDP growth in Armenia has not changed: - 3.4% in 2021, with an acceleration to 4.3% in 2022 and 5.3% in 2023 (against an actual decline of 7.4% in 2020). This is stated in the new June report of the World Bank "Global Economic Prospects".
In the neighboring countries of Armenia, the World Bank forecasts: in Georgia - GDP growth in 2021 by 6%, with a slowdown to 5% in 2022 and maintaining this rate in 2023; in Azerbaijan - GDP growth in 2021 by 2.8%, accelerating to 3.9% in 2022, and then decelerating to 3.4% in 2023; in Turkey - GDP growth in 2021 by 5%, with a slowdown in 2022 to 4.5% and the same rate in 2023; in Iran - GDP growth in 2021 by 2.1% with a moderate acceleration to 2.2% in 2022 and 2.3% in 2023.
Of the EAEU countries, only Belarus will linger in recession Among the EAEU countries, the World Bank predicts the same 3.2% GDP growth in 2021 across Russia and Kazakhstan. But in 2022-2023, Russia will slow down its GDP growth rate from 3.2% to 2.3%, and Kazakhstan will accelerate from 3.7% to 4.8%. And for Kyrgyzstan, the World Bank predicts a higher GDP growth for 2021 - 3.8%, with an acceleration to 4.3% in 2022 and 4.5% in 2023. And only in Belarus, GDP will linger in 2021 in a decline of 2.2%, after which in 2022 it will reach a weak 1.9% growth, which in 2023 will slow down to 1.2% WB predicts high GDP growth in China For the Europe and Central Asia (ECA) region, the World Bank forecasts economic growth in 2021 at 3.9%, maintaining this pace in 2022 and a slight slowdown in 2023 to 3.5%. The world economy, according to the WB forecast, after growth by 5.6% in 2021, will weaken the pace in 2022 to 4.3% and in 2023 to 3.1%. The US economy, according to the WB forecast, will grow by 6.8% in 2021, followed by a slowdown to 4.2% in 2022 and 2.3% in 2023. In the Eurozone, the World Bank predicts economic growth in 2021 by 4.2% with an acceleration to 4.4% in 2022 and a subsequent slowdown to 2.4% in 2023. For the Japanese economy, the World Bank forecasts growth by 2.9% in 2021, after which a slowdown is expected from 2.6% to 1% in 2022-2023. And China's GDP, according to the WB forecast, will accelerate growth in 2021 to 8.5%, then slow down to 5.4-5.3% in 2022-2023.
Risks affecting the forecast
In the analytical section of the ''Regional outlook Europe and Central Asia'' report WB notes that the forecast is subject to predominantly downside risks, including those related to the pandemic. Although the region has administered more vaccine doses per person relative to the world average, vaccine distribution and progress remain highly uneven; only about one-third of ECA's economies are above the world average, while the rest continue to trail the world average due to logistical challenges and vaccine hesitancy. Absent clear and consistent communication to strengthen public trust, the suspension of vaccines due to safety concerns could contribute to higher-than expected vaccine reluctance.
WB notes that the combination of supply bottlenecks and subdued vaccine demand in some ECA countries, juxtaposed with widespread vaccination in others, could contribute to an uneven regional recovery. The pandemic could also exacerbate the slowdown in investment in physical and human capital, which was already steep in ECA due to longstanding structural challenges. Following a collapse in fixed investment, forecasts for long-term investment growth point to a decline 1.7 percentage points over the next decade. The pandemic has also dented the accumulation of human capital through school closures and sustained spells of unemployment. On the upside, however, the pandemic offers opportunities to lift long-term growth. Digitalization could be harnessed to strengthen governance by enhancing public efficiency and transparency.
The risk of financial stress also looms over the region's outlook. Renewed policy uncertainty has exacerbated the decline in portfolio inflows and reignited currency depreciation and reserve losses. As a result, external financing pressures are building, particularly in countries with a large share of foreign-currency-denominated debt. An acceleration in inflation has further constrained the capacity of some central banks to buffer the impact of additional negative external shocks, with about one-third of the region's economies forced to raise policy rates in 2021. A sharper erosion of investor sentiment could abruptly tighten financing conditions, and lead to cascading defaults and rising non-performing loans. Corporate balance sheet pressures have continued to rise as authorities unwind liquidity support and regulatory forbearance, putting strain on the banking sector.
The possibility of intensifying geopolitical tensions is also a downside risk in ECA, and could be accompanied by additional sanctions and financial market pressures. The region could be destabilized by an escalation of conflict in Ukraine or between the Kyrgyz Republic and Tajikistan, as well as by elevated stability risks linked to post-conflict settlements between Armenia and Azerbaijan. Additional political pressures in Belarus or the Kyrgyz Republic could weaken the outlook in Eastern Europe and Central Asia. Disagreements between the EU and other major economies could also lead to additional sanctions that could have spillover effects into some ECA countries. A further rise in policy uncertainty, particularly in some of the region's large economies, could also undermine the recovery if it triggers financial stress.
After suffering the sharpest collapse in output among the ECA subregions in 2020 amid armed conflict, the South Caucasus is projected to return to positive growth, expanding 3.6 percent in 2021; growth is then expected to strengthen to 4.2 percent in 2022. The recovery in early 2021 remains muted, reflecting subdued domestic demand due to the pandemic, as well as an escalation in domestic political tensions (Armenia) and continued weakness in transport and tourism (Georgia). Monetary policy has also tightened, with Armenia and Georgia having hiked policy rates. The current forecast is predicated on the dissipation of the shocks related both to the pandemic and to conflict, and on a recovery in tourism alongside improving consumer and business confidence. Growth in Azerbaijan is expected to be supported by stabilization of oil prices as well as investment and reconstruction spending. The November 2020 ceasefire agreement between Armenia and Azerbaijan have alleviated geopolitical tensions in the region, although risks to stability remain elevated.
Recent currency depreciations have put further upward pressure on prices. Of the 17 ECA central banks with inflation targets, nearly half reported headline inflation above the upper bound of the target band in early 2021. As a result of inflationary pressures, policy interest rates have been raised in one-third of the region's economies thus far in 2021 (Armenia, Belarus, Georgia, Kyrgyz Republic, the Russian Federation, Tajikistan, Turkey, Ukraine). Although the banking sector has adequate liquidity and buffers in many ECA economies, increases in nonperforming and distressed loans are expected as countries continue to phase out regulatory relief and moratoriums on credit obligations. The large fiscal support packages delivered in 2020-equivalent, on average, to 7.5 percent of GDP-are expected to be partially unwound this year (figure 2.2.1.D). The fiscal response to the pandemic, together with last year's contraction in output, is expected to leave median public debt at 54 percent of GDP by end-2022-nearly 15 percentage points higher than in 2019. Nevertheless, targeted fiscal support, such as wage subsidies and cash transfers, is estimated to have helped avert a larger spike in poverty and job losses (Kazakhstan, Turkey, Western Balkans; World Bank 2021a). As countries gradually withdraw support measures, however, job losses could increase again.
WB leadership's opinion
"While there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world," said World Bank Group President David Malpass. "Globally coordinated efforts are essential to accelerate vaccine distribution and debt relief, particularly for low-income countries. As the health crisis eases, policymakers will need to address the pandemic's lasting effects and take steps to spur green, resilient, and inclusive growth while safeguarding macroeconomic stability."
"Linkages through trade and global value chains have been a vital engine of economic advancement for developing economies and lifted many people out of poverty. However, at current trends, global trade growth is set to slow down over the next decade," World Bank Group Vice President for Equitable Growth and Financial Institutions Indermit Gill said. "As developing economies recover from the COVID-19 pandemic, cutting trade costs can create an environment conducive to re-engaging in global supply chains and reigniting trade growth."
"Higher global inflation may complicate the policy choices of emerging market and developing economies in coming months as some of these economies still rely on expansionary support measures to ensure a durable recovery," World Bank Prospects Group Director Ayhan Kose said. "Unless risks from record-high debt are addressed, these economies remain vulnerable to financial market stress should investor risk sentiment deteriorate as a result of inflation pressures in advanced economies."
