ArmInfo. This year, the 12-month inflation is expected to exceed the 4% target and reach 8.5%, with average inflation to reach 8.1%, with a gradual decline to the targeted level during next year.
According to the 2023 budget message, Armenia's nominal GDP will reach AMD 9,317.9bln against the AMD 8,293.7bln expected by the end of this year and actual AMD 6,983.0bln in 2021.
"As a result of external developments, unprecedented relocation of IT companies to Armenia, inflow of human and financial capital, as well as sanctions against Russia, increased Armenian exports to Russia amid the fiscal measures being implemented by Armenia's government this year, 11% economic growth is expected, which is higher than over the last 14 years. Specifically, 7% growth is expected in 2023," the document reads.
The budgeted AMD/USD exchange rate is AMD 404.74/US $1, AMD 405.35/ US $1, AMD 467.84/њ1 and AMD 6.72/RUB 1.
Forecast aggregate supply
The real GDP growth will mainly be ensured due to a higher added value in the major branches of economy: a 5.1% increase in industry (a 5% increase by the end of this year against the actual 3.5% in 2021), 3% in the agricultural sector (a 2.2% increase by the end of 2022 and a 0.6% decrease in 2021), a 9.6% increase in the construction sector (against 16.9% expected this year and actual 3.1% in 2021), an 8.2% increase in the serves sector (against 15.6% expected this year and actual 7.9% in 2021), a 7.2% increase in net taxes against 6.2% expected this year and the actual 7.4% in 2021.
The aggregate supply is also expected to increase due to both internal supply and exports (especially due to exports of services).
The deflator is expected to show a 5% rise against 7% expected by the end of this year and actual 6.9% last year.
Forecast aggregate demand
Final consumption is expected to show a 7.8% increase in real terms, with an 18.3% increase in investments. The increase in consumption and investments will be accompanied by an increase in disposable incomes (with a high increase in money remittances included), use of the insurance funds the private sector accumulated during the pandemic, inflow of foreign nationals, continuing growth in housing construction, as well as the measures Armenia's government is taking to cope with the aftermath of the pandemic and Artsakh war and an environmentally-friendly investment policy.
Next year is expected to see a 4% increase in consumption and an 18.4% increase in investments due to both government (a 38.1% expected increase) and private investments by national and foreign funds (a 12.7% expected increase) due to the Armenian government's investment promotion policy.
Next year is expected to see exports and imports increasing by 33.9% and 24.1% respectively due to internal and external demand (especially in the exports of services), as well as economic activity. Next year is expected to exports and imports to increase by 9.3% and 5.8% respectively.
Labor market
Last year saw unemployment decline from 18.1% down to 15.3%, with the labor force participation rising from 58% to 58.5%. The same period saw a 0.3% increase in the number of employed and a 17.5% decrease in that of unemployed people. This year has seen a 7.6% increase in average monthly wages, with actual wages showing a 0.4% increase amid 7.2% average inflation.
The first quarter of 2022 saw unemployment decrease from 16.7% to 14.8%, with the labor force participation rising from 56.2% to 56.8%. The same period showed a 3.3% increase in the employed population up to 1,070.5 thousand people, with a 10.2% decrease in the unemployed population down to 186,400 people. This January-July, the average monthly number of officially registered unemployed population was 55, 432 (a 10.8% decrease). The period under review saw a 5.6% increase in hired labor force, which was mainly due to an increase in wholesale and retain trade, information and communication, public catering and accommodation sectors. This year's economic growth is expected to bring about positive changes on Armenia's labor market, with a consistent increase in employment and decrease in unemployment.
This January-July, the average nominal monthly wages totaled AMD 221,683, mainly due to an increase in salaries in the information and communication, financial and insurance sectors, as well as in wholesale and retail sale sectors. The average monthly wages in the government sector reached AMD 179,209 (a 4.3% increase), with that in the private sector reaching AMD 240,489 (a 14.3% increase).
Balance of payment, exports and imports
Due to the outrunning growth in imports against exports, this January-July saw a worse trade balance, a better services balance and a considerable increase in money transfers to Armenia. The services balance improved due to the removal of COVID restrictions and a 2.4-fold increase in the number of tourists visiting Armenia in the wake of the Russian-Ukrainian conflict. Besides, commercial and noncommercial money transfers individuals receive by means of Armenian banks showed a high-rate increase, with noncommercial money transfers showing a slower-rate increase. Specifically, this January-July saw a 2.1- fold increase in money transfers from abroad.
The decreased role of the trade balance and noncommercial money transfers (wages and transfers) in the GDP is expected to increase the current account deficit, up to 4.5% of the GDP this year, with a further increase expected next year amid a decreasing share of money transfers.
Export. This year has seen a sharp increase in Armenia's exports - a 52.9% this January-July. That was mainly due to an increased demand on some export markets, AMD depreciation against the RUB, as well as expansion of sales markets for Armenia's exports to Russia. This year is expected to see a 53.3% increase in exports, with a 14.3% increase in exports of goods and services expected next year.
Imports: This January-August saw a 58.2% increase in imports, mainly due to high economic activity and high domestic demand, as well as high-rate increase in imports of machinery and high import prices (8.7%). This year is expected to see a 44% increase in imports, with an 11.6% next year.
