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).
