ArmInfo. The Eurasian Development Bank (EDB) projects Armenian GDP growth at 7.5% in 2024. This is stated in the EDB Macroeconomic Review for August 2024. EDB expects that the Central Bank will continue reducing its refinancing rate to 7.5% in late 2024. "This will only happen if inflation remains under the CB RA target range (4+1.5%). Inflation could accelerate to 1.5% in 2024 amid strengthening domestic demand, moderate weakening of the national currency, and likely further reductions of the refinancing rate. We believe that monetary policy will gradually cease its curbing of demand in 2024. The IBL rate will fall to 7% in 2025, which will be on a par with the CB RA's stable inflation target range."
According to report "Armenia's economic growth rates accelerated in early 2024. The country's economic activity rose by 13.2% YoY over January-April, fuelled by the industry sector with its contribution of about 5.1 p.p. of growth, accounting for +26.8% YoY over January-April. The main sectors encouraged business activity, but this was primarily due to concentrated growth in some industries. For example, industry and trade grew by 26.7% YoY thanks to a manifold increase in the processing of, and foreign trade in, goldware; the services sector went up 3.9% YoY because of an increase in financial activities (+16.8% YoY). At the same time, most other services and manufacturing sectors showed weak output.
Industry growth accelerated in early 2024 because of an increase in the processing of, and foreign trade in, exportable goldware at the end of the previous year. Output in other key industry sectors dropped after it peaked in 2022-2023. A 4.6-fold YoY increase in goldware production in January-April offset the decline and slowdown in other major industry sectors. Construction, however, is keeping up the pace (up 13.7% YoY in January-April), bolstered by high mortgage lending (+23.3% YoY in April). Overall lending (up 21.2% YoY in April), significant savings, and lower consumer prices propped up domestic demand.
Cross-border remittances amounted to $1.7 billion over January-April 2024, traditionally high, as in 2022- 2023, albeit slightly lower (down 18.2% YoY).
Foreign trade volumes kept going up in the first half of 2024. In January-April, exports grew by a factor of 2.8 amid increased production and exports of goldware. Precious stones and metals boosted exports, along with supplies of machinery and equipment, as they rose 9-fold YoY in January-April. Imports in January- April grew by a factor of 2.1 YoY and were mainly driven by imports of precious stones and metals for processing and subsequent export, as well as machinery and equipment. There were fewer motor vehicles and non-precious metals imported, but other imports were steady in January-April.
Prices increased for the first time in May after an extended period of desinflation. Prices rose 0.3% in May after a 0.7% decline a month earlier, with prices continuously falling in the food segment: for example, food fell in price by 2 % YoY in May after a 4.5% YoY decline in April. 4 Inflows were $5.6 billion in 2023 and $5.1 billion in 2022, compared to an average of $1.9 billion per year in 2018-2021. Republic of Armenia 19 Consumer price dynamics are uneven, mostly owing to a decrease in the cost of imported food amid lower prices on international markets, tight monetary conditions and the strengthening exchange rate of the dram. Inflation is steady when it comes to non-traded goods and services, but it slowed slightly to 2.4% YoY in March6, a bellwether of cooling inflation expectations."
The Central Bank of Armenia had a meeting on 11 June, where it decided to reduce the refinancing rate for the ninth time in a row, this time by 0.25 p.p. to 8%, a decision brought about by low inflation from declining international commodity prices, the strengthening exchange rate of the dram, and the cooling labour market. Overall, the Bank has decreased the refinancing rate by 2.75 p.p. since it started its round of cuts in the second half of 2023.
"The country's major economic partners are likely to experience a cooling of their economic growth in 2024, hindering remittances and external demand on most exports. Exports, however, will not suffer much and will still go strong due to ultra-big foreign trade in goldware. Under the baseline scenario, we project inflation at 1.5% YoY at the end of 2024. A disinflationary effect from global commodity prices will curb prices, along with lower inflation expectations and the strengthening exchange rate of the dram. The easing by the Central Bank of the Republic of Armenia, a stimulative fiscal policy, and higher domestic demand will accelerate inflation in 2024. Inflation will form at the lower end of the Central Bank's target range in 2025-2026 (4+1.5%)" the EDB Macroeconomic Review specifies.
