Armenia`s Central Bank predicts slower GDP growth of  5.1-4.6% in  2025, with a significant decline in exports and imports 

ArmInfo.The Central Bank of Armenia has revised its GDP growth forecast for 2025 from the previous range of 7-4.5% to a new range of 5.1-4.6% (compared to the actual 5.9% growth in 2024). The Central Bank has also adjusted its GDP growth forecast for 2026, now anticipating a slowdown to 4.9-4.4%, instead of the previous 4.7-7% (depending on the inflation trajectory).

As a result, the absolute value of GDP is expected to  increase in 2025 to 11.077-11.032 trillion drams (up from 10.193  trillion drams in 2024), and then potentially  reach 12.3-12.2  trillion drams in 2026, as noted in the report of the Central Bank of  the Republic of Armenia "Monetary Policy for the II quarter of 2025"  published on June 17. 

With the transition to the new and improved system for developing  monetary policy (FPAS MARK II), the Central Bank started calculating  the GDP forecast based on Case A and Case B scenarios starting in  2024.  In Case A scenarios, monetary policy rates  are assumed to be  higher than exceed market expectations, as risk and uncertainty  factors can lead to  a more inflationary environment in the economy.  Case B scenarios assume lower monetary policy rates than market  expectations, as risk and uncertainty factors can result in a  deflationary or low inflation environment in the economy. In  Case A  scenarios, there is an expansion of demand and a curb on supply,  while in Case B scenarios, there is a curb on demand and an expansion  of supply. 

It is worth noting that inflation forecasts for 2025  have been  significantly revised in the new forecast, increasing from the  previous 2.6-2.4% to an updated 3.4% (according to Case A) and 3.2%  (according to Case B), against an inflation rate of 1.5% in 2024. By  2026, inflation ix expected to approach to the updated target level  (3%, +/- 1 p.p.) - up to 3.2% (according to Case A) or up to 2.9%  (according to Case B). Moreover, inflation in the segment of  non-exportable goods, which is characterized by rigid prices, is  projected to increase to 2.7-2.6% (from 2.5% in 2024) in 2025, and  continue to rise  to 3.5-2.8% in 2026.

 According to the updated forecast of the Central Bank, the dynamics  of exports and imports are expected to change. In 2025, there will be  a decline of 32.3-36.4% (for exports) and  29-34.2% (for imports),  following almost identical growth of 35,6-31,4% in 2024. In 2026, the  Central Bank predicts an improvement. with exports growing 5.4-5%,  and imports by 4.7-3.1%. Compared with the previous March forecast,  there is now an even more noticeable decline expected for  both  exports and imports in 2025. with an  improvement in the trend of  both exports and imports in 2026. The ratio of the current account  deficit to GDP is projected to be 4.7% (according to Case A) or 3.3%  (according to Case B), after reaching a positive 2.8% in 2024 (up  from negative 2.3% in 2023). In 2026, this indicator will remain   negative at 4.4% (according to Case A) or 2.5% (according to Case B).

The ratio of remittances to GDP will decrease in 2025 to 3% (after  increasing from 4.1% to 6.2 % in 2024), and then in 2026 will remain  at the level of 3-3.1%. This fixes  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 budget revenues and  expenditures for 2025 remains 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%, with a slight  increase in the share of revenues in GDP from 25.4% to 25.6-25.7% and  a more noticeable increase in the share of expenditures in GDP from  28.6% to 31.1-31.2%. The 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. 

The US economy is expected to slow down in 2025 to 2% (from 2.8% in  2024) and inflation to weaken from 3% to 2.8%. The Eurozone economy  will slightly accelerate in growth in 2025 to 1% (from 0.9% in 2024),  with inflation weakening from 2.4% to 2.1%. The Russian economy will  stall in growth in 2025 to 1.6% (from 4.3% in 2024), with inflation  remaining at 8.4%. In 2026, the US economic growth will slow down to  1.9-1.5%, the Eurozone will slightly accelerate to 1.1%, and Russia  will remain at 1.6%, with inflation in the US, the Eurozone and  Russia continuing to decline to 2.7-2.6%, 2-1.8% and 4.9-5%,  respectively. The oil price, according to the new forecast, will fall  from $80.5 in 2024 to $65.5-65.3 per barrel in 2025 and further to  $61.3-60.7 in 2026. The price of copper, unlike the previous  forecast, will increase more noticeably - from $9142.1 per ton in  2024 to $9441.1-9426.7 per ton in 2025 and further to $9762.1-9702.7  in 2026. The FAO index, after declining in 2023-2024 from 124.1 to  122, will begin to grow in 2025 - reaching 129.9-129.7, and then in  2026 will continue to grow to 133-132. Then, in 2027, copper will  continue to rise in price, the FAO index will increase slightly, and  the price of oil will decrease even more.