Friday, November 26 2021 23:16

ArmInfo.The unpredictable pandemic situation  and steadily high inflation remain the major risks to the basic  scenario of Armenia`s economic development, according to a  macroeconomic forecast by the Eurasian Development Bank (EDB). 

A worsened epidemiologic situation and global economic recession will  affect Armenia`s economy as well.  Exports, money transfers and  tourism could decline amid poor economic activity in the countries  that are main trade partners of Armenia. A worsened epidemiologic  situation in Armenia could affect the dynamics in the services  sector. The risks of pro-inflationary factors remain - rise in food  and raw materials prices, affected logistical chains. Moreover, the  food price inflation could remain high next year, due to high price  for exported agricultural products. 

EDB analysts forecast 4.8% economic growth in Armenia for next year  after the 4.5% growth this year. A compared with the last forecast,  the forecast economic growth is 0.4 percent point lower due to a  negative dynamics in the industry and agriculture in the third  three-month period. The real GDP is expected to reach the pre-crisis  level in the second three-month period of next year, with the  forecast growth being 4.8%.  Next year, the economic growth will be  maintained due to high prices for metals, recovered agricultural  output, steady dynamics in the processing industry, constriction and  services sectors.  A moderate investment activity in the private  sector, exhausted pent-up consumer`s demand, less stimulative  monetary policy along with the end of the recovery will prove to be  the factors to restrict economic growth.  

According to the scenario, the mid-term economic growth rate will be  near the potential growth rates (3.5% yearly). The implementation of  the government plans to improve the business and investment  environment and capital investments could essentially accelerate the  potential GDP growth.  The EDB forecasts an inflation of 5% in  Armenia by the end of next year after the 8% inflation forecast for  this December. A slower price rise is forecast from this December.  Exhausted pent-up demand, monetary policy and steady prices in the  raw material and product markets will slow down inflation rates.  By  the end of the second three-month period of 2020 the targeted  inflation is expected. A risk of steady food price inflation is  forecast for the first half of next year because of high prices for  exported agricultural products. According to the basic scenario, 5%  inflation is expected for the end of 2020 and 4.6% inflation for the  end of 2023. In the mid-term inflation will be within the target set  by the CBA - near 4.4% In the first half of next year, the monetary  conditions will be a poorly containing factor. The interbank loan  rate will form near the current level by the end of this year. 

In 2022, as the inflationary pressure is exhausted and higher  inflationary expectations show a decline, the EDB forecasts an end to  the upward trend in the refinancing rate. The rate could be reduced  down to an average of 6.7% next year. As a result, neutal monetary  conditions are expected at the end of next year. The average  interbank loan rate is expected to be 6% in 2023, which is in line  with the CBA-targeted steady inflation.  

The forecast average AMDUSD exchange rate is AMD 466$1 next year  against the AMD 505$1 this year. Money transfers, profits from  exports amid high prices for metals and food products, increased  international reserves, including due to the IMF-issued SDR, will  contribute to the AMD revaluation.  Moreover, AMD will bee supported  by higher rates in Armenia`s financial market. According to the EEDB,  the Armenian dram could remain overrated for most of 2022, a higher  inflation than in the trade partner states being one of the reasons.  In 2023, the national currency will be within equilibrium values.  According to the basic scenario, the average AMD exchange rate is 466  for 2022 and AMD 480 for 2023.