ArmInfo. The Central Bank of Armenia has revised its GDP growth forecast for 2025 from the previous 7.1-4.8% to an updated 7-4.5% (against the actual 5.9% growth in 2024). The Central Bank has also revised its GDP growth forecast for 2026, now expecting a slowdown to 4.7-4.1%, instead of the previous slowdown to 4.7% or acceleration to 7% (depending on the inflation trajectory). As a result, the absolute value of GDP will increase in 2025 to 10.956-10.715 trillion drams (from 10.127 trillion drams in 2024), and then in 2026 it may reach 11.5-11.2 trillion drams. This is noted in the March report of the Central Bank of the Republic of Armenia "Monetary Policy for the First Quarter of 2025".
Thus, with the transition to a new improved system for developing monetary policy (FPAS MARK II), the Central Bank began to calculate the GDP forecast based on Case A and Case B scenarios starting in 2024. Thus, Case A scenarios assume monetary policy rates that exceed market expectations, given that risk and uncertainty factors can create a more inflationary environment in the economy. Case B scenarios assume lower monetary policy rates than market expectations, given that risk and uncertainty factors can create a deflationary or low inflationary environment in the economy. Moreover, Case A scenarios provide for an expansion of demand and a curb on supply, while Case B scenarios, on the contrary, provide for a curb on demand and an expansion of supply.
It is noteworthy that inflation under these scenarios in the new forecast for 2025 has been significantly revised - from the previous 3.9-3.2% to an updated 2.6% (according to Case A) and 2.4% (according to Case B), against the inflation rate of 1.5% in 2024. And already in 2026, there will be an approach to the updated target level (3%, +/- 1 p.p.) - up to 3.1% (according to Case A) or up to 2.9% (according to Case B). Moreover, inflation in the segment of non-exportable goods, characterized by rigid prices, will increase in 2025 to 3.1-2.8% (from 2.5% in 2024), after which in 2026 it will either continue to grow to 3.9% or quietly weaken to 2.4%.
The dynamics of exports and imports, according to the updated forecast of the Central Bank, after almost identical growth in 2024 by 35.6-31.4% will worsen in 2025 to a decline of 19.8-24% (for exports) and 19.7-22.8% (for imports). Further, in 2026, the Central Bank expects an improvement in the dynamics of exports towards 2.8-0.4% growth, and the import trend will either also reach 3% growth or linger in decline with a slowdown in rates to 1.2%. Moreover, in comparison with the previous forecast, a more noticeable decline is now expected for 2025 in both exports and imports, and in 2026 an overly modest improvement in the trend.
The ratio of the current account deficit to GDP, according to the new forecast of the Central Bank, will be formed in 2025 at the level of 3.4% (according to Case A) or 5.3% (according to Case B), after reaching positive 2.8% in 2024 (from negative 2.3% in 2023). Then, in 2026, this indicator will continue to deepen to negative 3.9% (according to Case A) or 5.6% (according to Case B).
The ratio of remittances to GDP, according to the updated forecast of the Central Bank, will decrease to 3% in 2025 (after increasing in 2024 from 4.1% to 6.2%), and then in 2026 will remain at this level, thereby recording the duration of the weakening of the economic effect in terms of the impact of transfers on the economy.
The Central Bank's forecast for 2025 on budget revenues and expenditures has not changed: expenditures will grow more noticeably - from 2.9 trillion to 3.4 trillion drams, than revenues - from 2.6 trillion to 2.8 trillion drams, as a result of which the state budget deficit will increase from 319.2 billion to 604.1 billion drams. As a result, in 2025, the ratio of the state budget deficit to GDP will increase from 3.2% to 5.5- 5.6%, with a slight increase in the share of revenues in GDP from 25.4% to 25.9-26.5% and a more noticeable increase in the share of expenditures in GDP from 28.6% to 31.4-32.1%.
This report by the Central Bank of the Republic of Armenia also provides forecasts for economic development and inflation in the United States, the Eurozone, and the Russian Federation, for oil and copper prices, and for the FAO index. Thus, the US economy is expected to grow by 2.6% in 2025 (versus 2.8% in 2024) and inflation to decline from 2.9% to 2.6%. The Eurozone economy will show growth of 1% in 2025 (versus 0.7% growth in 2024), with inflation declining from 2.4% to 2.1%.
The Russian economy will maintain growth in 2025, with a slowdown in growth rates to 2% (from 4.1% in 2024), with inflation weakening from 8.4% to 6.3%. In 2026, the US economic growth will slow down to 2%, the Eurozone will accelerate slightly to 1.2%, and Russia will slow down to 2.1%, with inflation in the US, the Eurozone, and Russia continuing to decline to 2.1%, 2%, and 3.4%, respectively. According to the new forecast, the oil price will fall from $80.5 in 2024 to $73.4 per barrel in 2025 and then to $69.9 in 2026. The copper price, unlike the previous forecast, will increase more moderately - from $9,142.1 per ton in 2024 to $9,393.7 per ton in 2025 and then to $9,541.9 in 2026. The FAO index, after declining in 2023- 2024 from 143.5 to 122, will begin to grow in 2025, reaching 127.3, but in 2026 there will be another decline, to 125. Then, in 2027, copper will continue to rise in price, and the FAO index and the price of oil will decrease even more.
The International Monetary Fund (IMF) and the World Bank (WB) forecast a similar slowdown in GDP growth for Armenia in 2025, to 4.9% and 5%, respectively. The European Bank for Reconstruction and Development (EBRD) also forecasts a slowdown in Armenia's GDP growth in 2025 to 4.8%. The Asian Development Bank (ADB) expects Armenia's GDP growth to be 6% in 2025. The Eurasian Development Bank (EDB) forecasts a less noticeable slowdown in Armenia's GDP growth in 2025, to 5.5%. According to the Statistical Committee of the Republic of Armenia, Armenia's GDP in 2024 slowed in growth to 5.9% (from 8.3% in 2024 and 12.6% in 2023), exceeding 10.127 trillion drams ($26 billion). The draft budget for 2025 envisages GDP growth of 5.1%.
The new Forecasting and Policy Analysis System (FPAS) adopted by the Central Bank of the Republic of Armenia serves for the purposes of information and analytical support in making decisions on monetary policy and consists of all the elements necessary for inflation targeting: data collection and processing, monitoring the current economic situation, development and improvement of models, the process of making decisions on monetary policy, as well as an open communication policy. The FPAS system includes the process of developing short-term and medium-term forecasts of macroeconomic indicators in order to assess the state of the economy and development prospects, which are taken as the basis for making strategic decisions on monetary policy. FPAS consists of two main stages: the first is an analysis of current conditions and a short-term forecast; the second is a medium-term forecast. The model has the advantage of analyzing potential actions of the Central Bank depending on the internal and external economic situation, allowing decisions on the key rate to be made based on the forecast level of inflation and other macroeconomic indicators.
