ArmInfo. With its new forecast for 2022, the Central Bank of Armenia,, further reduced the decline in net inflow of transfers (including income of seasonal workers and private transfers) from the previous 13% to 7% (against an actual 54% growth in 2021), based on estimates of more positive changes in the Russian economy, the projected decline of which is reduced from the previously expected 7.4%).
This to 4.2% is noted in the Monetary Policy Program (MPP) of the Central Bank for the third quarter of 2022, published on September 28, which also indicates an improved forecast for GDP growth for 2022 from the previous 4.9% to an updated 12.9% (against the actual 5.7 % growth in 2021).
According to the new forecasts of the Central Bank of the Republic of Armenia, the ratio of individuals' transfers to GDP will decrease from 9.3% to 6.3% in 2022, followed by a year-on-year decline to 4.2% in 2025, which indicates the duration of the weakening of the economic effect in terms of the impact of transfers on the economy.
Under the current development scenario, the current account deficit to GDP will deepen to 3-4% in 2022, and in the medium term, the easing of uncertainties, and in parallel with this, the gradual adjustment of high external demand will stabilize the ratio of the current account deficit to GDP in an estimated balanced range of 4- 6%.
According to the Central Bank of the Republic of Armenia, in 2021, the growth of the net inflow of private transfers to Armenia accelerated to 54% from 14% in 2020, which is due to the recovery of the dynamics of incomes from the Russian Federation from the 42.1% decline to 27.1% growth, with a significant slowdown in their growth from the US from 50 -fold to 32%. As a result, the total net inflow of private transfers in 2021 amounted to $883.3 million, in particular, from the Russian Federation - $463.8 million, and from the USA - $391.3 million.
In terms of inflows and outflows, the dynamics of the first one increased in 2021, while the second one continued to decline. Thus, the inflow of private remittances to Armenia increased the y-o-y dynamics from a 6% decline to a 14.5% increase, up to $2.109 billion., and the downtrend of the outflow of transfers from Armenia slowed down from 13% to 3.3%, amounting to $1.226 billion This was the result of a 5% increase in remittance inflows from Russia, while outflows to Russia fell by 12.6%, while inflows from the United States slowed to 26.5%, with outflows to the United States recovering from a 16% decline to.5% growth.
The share of Russia in the inflow decreased over 2021 from 45% to 41% (against 54% in 2019), while also decreasing in the outflow - from 36% to 33% (against 29% in 2019). And the US share in the inflow, on the contrary, continued to grow - from 25% to 28% (against 14% in 2019), while increasing in the outflow - from 13% to 15% (against 19% in 2019).
However, it would be appropriate to note that in 2022 there has been a surge in transfers from Russia to Armenia, provoked by the massive arrival of Russians along with the movement of their capital. Moreover, on a monthly term, a significant increase in the net inflow of transfers from Russia began to be observed already in February (a 3-fold increase), continuing to grow at a rapid pace in the following months. As a result, Russia's share in inflow increased to 60.5% in H1 2022 from 39.6% in H1 2021 (vs. 51.3% in H1 2019). Such an increase in transfers is explained by the arrival of a huge number of Russians in Armenia who, due to the Russian-Ukrainian conflict and the West's anti-Russian sanctions (including switching off S.W.I.F.T. system, withdrawal from the Visa and MasterCard market, blocking of Western social networks) faced with difficulties in their work, financial and card transactions in their homeland.
In support of this, experts cite the statistics of companies opened in Armenia in April-May, the number of which has increased significantly after the arrival of the Russians, and most of them, in order to avoid anti- Russian sanctions, migrate and move their capital. "In addition to business purposes, Russians spend money in Armenia on recreation, entertainment, rental housing, etc. These funds, in turn, spur growth especially in the service sector, as well as in the real estate market and the trade sector. As a result, an increase in economic activity in Armenia to a double-digit pace largely came from the growth of the service sector," experts say, assuring that this growth was provoked by the arrival of so many Russians. But how long the increase in remittances and long-term the stay of Russian citizens in Armenia will be, according to experts, depends on the outcome of the Russian-Ukrainian conflict and Western sanctions against Russia.
