CBA improves GDP growth forecast for 2023 from 7.2% to 8.3% and from  5.6% to 6.1% for 2024

ArmInfo.The Central Bank of Armenia has once again improved its  GDP growth forecast for 2023 -  from the previous 7.2% to an updated 8.3%. At the same time, thechief bank revised its GDP expectations for 2024 - towards higher growth of 6.1% (against the previously forecasted 5.6%). Governor of the Central Bank of the Republic of Armenia Martin Galstyan stated on December 12 during a press conference regarding the next reduction in the refinancing rate from 9.5% to 9.25%.

The improved forecast for 2023 is supported by the preservation of  relatively high growth rates in the construction sector (17.7%) and  the services sector (11.4%), against previously forecasted 18.4% and  9%. 

In addition, a 0.6% growth in the agricultural sector is expected,  but the industrial sector will be in a 0.9% decline, whereas  previously a decline for the agricultural sector (by 1.1%), and  growth for the industrial sector (by 1%) was forecasted.

Tax collections will increase by 10.3%, against the previously  expected 9.5%.

Galstyan noted that in Q4 2023, Armenia maintains high economic  activity, supported by strong growth in the construction and services  sectors. However, Galstyan noted that economic activity in the world  and in Armenia's trading partner countries continues to slow down,  which is reflected by lower prices on international commodity markets  and a slowdown in global inflation. Under these conditions, central  banks of partner countries continue to pursue a contractionary  monetary policy to a certain extent. As a result, a deflationary  impact from the external sector on the Armenian economy is expected.  "External demand is slowing, while domestic demand continues to  remain high. The latter is mainly reflected in the high growth of  private consumption, and according to forecasts for 2023, spending in  the private sector will increase by 7.6%," Galstyan said.

Emphasizing that the Central Bank's primary goal is to achieve low  and manageable inflation, the chief banker, forecasts: "YoY inflation  will be below the target threshold, but in the medium term it will  stabilize near the targeted 4%."

Referring to the quarterly survey of economic agents conducted by the  Central Bank, Galstyan drew attention to the fact that the percentage  of those expecting high inflation is decreasing, but too slowly - to  21.5% in Q4 2023, however, the range of uncertainty has increased  quite significantly - to 46.3%.  "Under these conditions, our task is  to anchor inflation expectations but the problem is that these these  expectations are asymmetrical in nature, i.e. unanchoring happens  faster than a return to the previous level and anchoring of  expectations," he explained.

The International Monetary Fund (IMF) forecasts the growth of  Armenia's GDP by 5.5 in 2023,with a slight slowdown to 5% in 2024.  The World Bank (WB) expects 4.4% economic growth in Armenia in 2023,  with the pace accelerating to 4.8% in 2024. The EBRD forecasts  Armenia's GDP growth by 6.5% for 2023, with a slowdown to 4.5% in  2024. The 2024 RA budget draft envisages 7% economic growth (similar  to the rate envisaged in the RA budget for 2023), and the increase in  added value is expected to be achieved in industry - by 4.7%, in  agriculture - by 3 .5%, in construction - by 8.9%, in the service  sector - by 7.9%, and tax collection will increase by 7.3%.

According to actual statistical data, Armenia's GDP in 2022  accelerated in growth to double-digit 12.6% (from 5.8% in 2021),  exceeding 8.5 trillion drams ($21.6 billion, at the rate of 393.57  drams/$1 as of 12/31/2022). But in 2023, the growth of economic  activity in Armenia began to slow down, amounting to 9.2% per annum  in January-October (versus 14.5% growth a year ago in the same  period). As for inflation, according to statistical data, it began to  slow down monthly in 2023, changing to 0.5% y-o-y  deflation of 0.5%  in November of this year (against y-o-y inflation of 8.8% in November  2022).