Thursday, June 20 2024 12:50

EDB forecasts downtrend in GDP growth to 5% 

EDB forecasts downtrend in GDP growth to 5% 

ArmInfo. By next 2025, the Eurasian Development  Bank (EDB) predicts a decrease in Armenia's GDP growth rate to 5% due  to the absence of any other impulses that could accelerate economic  growth. Anton Dolgovechny, senior analyst at the Country Analysis  Center of the EDB Analytical Directorate, stated this at the online  presentation of the analytical report "Macroeconomic Forecast 2024-  2026".

He emphasized that the current high growth of Armenia's GDP is  largely due to the increase in the production of gold products. In  January-April the increase was 4.5 - 4.6 times. Accordingly, this  boosted industrial growth, as well as GDP growth. "According to our  estimates, this is about 40% of the increase in business activity in  January-April, that is, a lot," the analyst noted. Dolgovechny  expressed his belief that the influence of this factor will be  exhausted by the end of the current 2024 and, accordingly, in 2025  there will be no more such additional impulse.

'In addition, in our baseline forecast we assume a slowdown in growth  among Armenia's main trading partners. This will certainly lead to a  decrease in the rate of remittance receipts and, accordingly, will  cool domestic demand. "Since today we do not have additional  information about any other impulses that could accelerate economic  growth, in this regard we assume a return of the economy to balanced  growth rates, that is, at the level of 5%," he emphasized.

According to the Bank's Forecast, Armenia's GDP growth in 2024 will  be 7.5%, the inflation rate will drop to 1.5%, and the average annual  dollar exchange rate will be 396 drams. In 2025, the country's GDP  growth will decrease to 4.2%, and in 2026 it will increase to 4.9%.  The inflation forecast for next year was 2.5%, and in 2026 - 2%. The  average annual exchange rate of the dram to the US dollar is  projected at 398 drams, and in 2026 - at around 399 drams. According  to the bank's analysts, the average annual rate on interbank loans  (IBC) in Armenia in 2024 will be 8.3%, and then go down and in 2025  it will be at the level of 6.7%, and in 2026 it will drop to 6.0%.

Bank analysts identified possible risks for the Armenian economy,  which were briefly mentioned by Anton Dolgovechny. This is a strong  concentration of economic growth in several sectors, which creates  risks for the sustainability of growth indicators in the base  scenario forecast. The high economic growth rates of Armenia in the  first half of 2024 are mainly associated with increased production  and export of jewelry. If this factor is short-term, the risks of  significantly slower economic growth in 2024 compared to the baseline  scenario increase.

A significant slowdown in the growth rate of the global economy and  in the main trading partner countries.  High interest rates in  developed countries and structural problems in the Chinese economy  could be factors in a significant reduction in consumer and  investment activity. The decline in energy demand will also affect  the Russian economy. In such conditions, external demand and the  level of remittances will decrease for Armenia, and devaluation  pressure on the Armenian dram will increase.

The driver of economic growth in Armenia in 2022-2023 may become a  risk for the economy. The likelihood of an outflow of capital and  labor resources is becoming a significant threat to the economy and  the stability of the national currency. The outflow of the net inflow  of cross-border remittances will primarily lead to a sharp  depreciation of the national currency and a surge in prices.  

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