ArmInfo.For the second year in a row, the Armenian economy will become the leader in terms of economic growth among the countries in the region. According to estimates by the Eurasian Development Bank (EDB), the country's GDP growth at the end of 2023 will be 8.3% (against the previously projected 7.5%). Alexey Kuznetsov, Head of EDB Research Department, announced on Thursday in Almaty, presenting the EDB Macroeconomic Outlook 2024-2026.
According to him, a significant increase in the volume of remittances entering the country and high tourism activity ensured strong dynamics of consumer demand in the services and trade sectors. GDP was also supported by a significant increase in investment and construction volumes.
"The forecast for economic growth in Armenia for 2024 has been improved to 5.7% (from the previous almost 5%) amid an improved forecast for the influx of cash flows from Russia and strong domestic demand. Fiscal policy and the resumption of work at the Amulsar mine will also support economic growth. In 2025-2026, Armenia's GDP growth is projected to be around 5% y/y," Kuznetsov noted.
According to him, the Bank forecasts almost 3.6% inflation in Armenia at the end of 2024 versus 0.3% in 2023. At the same time, the analyst noted that price growth may be slightly lower than the target rate of the Central Bank of the country in H1 2024 (4%) due to the disinflationary impact of world prices for goods and raw materials and a decrease in inflation expectations. The growth of domestic demand against the backdrop of a stimulating fiscal policy will create the preconditions for further progress of inflation towards the target threshold.
"We expect the refinancing rate to decrease to 8% per annum at the end of 2024. Low inflation and a gradual slowdown in economic growth create conditions for continued reduction of the refinancing rate in the H1 2024. In the medium term, we expect inflation to reach the target level and economic growth to stabilize. This will create conditions for maintaining the refinancing rate at about 8% in 2025-2026," Kuznetsov added.
At the same time, he emphasized that the dram exchange rate in 2024 is projected to average 414 drams per dollar. A decrease in export growth rates with strong import dynamics due to high domestic demand will become factors for a gradual devaluation of the national currency.
"We expect that the GDP of the EDB region of activity will increase by more than 3% by the end of 2023. Despite the difficult external background in 2023, the region is demonstrating strong recovery growth (over 3%) - the highest figure in the last 10 years, excluding the post-pandemic period," the EDB analyst continued.
Kuznetsov drew attention to the fact that the basis for growth was provided by internal drivers: consumer and investment demand, as well as the adjustment of production to the changed operating conditions. Fiscal policy provides additional significant support in a number of countries.
EDB analysts also note that in 2024, economic growth in the region is projected at 2%. The region will experience multidirectional dynamics: growth in business activity in Kazakhstan will continue to accelerate and will amount to 5% in 2024, while growth in other participating countries will experience a slight slowdown.
Inflation in the EDB region of activity will slow to 5.8% in 2024 from 7.8% in 2023. Due to overheating in the labor market and large-scale economic incentives, price pressures formed in a number of countries in the region in H2 2023
High interest rates will lead to a slowdown in inflation in Russia to 5.4% in 2024, to 7.1% and 7.8%, in Kazakhstan and Kyrgyzstan, respectively. In Armenia, Belarus and Tajikistan, on the contrary, inflation is expected to increase to 3.6%, 8% and 6.6%, respectively.
