Wednesday, September 28 2022 20:06
Karine Melikyan

With its new forecast for 2022, CBA further reduces decline in net  inflow of transfers from previous 13% to 7%

With its new forecast for 2022, CBA further reduces decline in net  inflow of transfers from previous 13% to 7%

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. 

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