RA CB forecasts GDP growth of 6.3-4.1% in 2026

ArmInfo. The Central Bank of Armenia forecasts GDP growth of 6.3-4.1% in 2026 and then 4.9-5.3% in 2027, also expecting an improvement in the dynamics of foreign trade. 

In 2025, according to the Central Bank, GDP growth will amount to  5.9% (similar to the actual 5.9% growth in 2024). As a result, the  absolute value of GDP will increase in 2025 to 11.2 trillion drams  (from 10.2 trillion drams in 2024), with a subsequent increase in  2026 to 12-12.3 trillion drams and in 2027 to 13- 13.3 trillion  drams. This was noted in the Central Bank of Armenia's December  report, "Monetary Policy for Q4 2025."

Thus, with the transition to the new, improved monetary policy  development system (FPAS MARK II), the Central Bank has begun  calculating its GDP forecast using Case A and Case B scenarios  starting in 2024.  Case A scenarios assume monetary policy rates  above market expectations, given that risk and uncertainty factors  could create a more inflationary environment in the economy. Case B  scenarios, on the other hand, assume monetary policy rates lower than  market expectations, given that risk and uncertainty factors could  create either a deflationary or low-inflationary environment in the  economy. Moreover, Case A scenarios envision expanding demand and  curbing supply, while Case B scenarios, conversely, envision curbing  demand and expanding supply. It is noteworthy that inflation under  these scenarios is estimated at 3.6% in 2025, with a new target of 3%  +/- 1 percentage point (compared to 1.5% in 2024, with the previous  target of 4% +/- 1.5 percentage points). Inflation in 2026 and 2027  is projected to range from 3.8-2.6% to 3.3- 2.8%, respectively.  Moreover, inflation in the non-exportable goods segment,  characterized by rigid prices, is projected to decline to 2.2% in  2025, according to the new forecast (from 2.6% in 2024), after which  it will reach 3.5-2.2% and 4-2.5% in 2026 and 2027, respectively.

According to the Central Bank's updated forecast, export and import  dynamics, after nearly equal growth in 2023 of 30.7-30.2% and a  decline in 2024 of 11-3.2%, will deepen into negative territory in  2025 by 37.3- 36.1% (for exports) and 32.7-32.5% (for imports).  However, as early as 2026, the Central Bank expects both export  dynamics to improve, with growth of 4.5-3.4% and import dynamics of  3.1%, with this trend continuing in 2027 to 3.9-4.1% (for exports)  and 4.2-3.8% (for imports). The Central Bank's new forecast for the  current account deficit to GDP is projected to reach 4.8% (Case A) or  4.5% (Case B) in 2025, compared to a negative 4.6% in 2024. This  figure will then remain negative at 5.4% (Case A) or 3.7% (Case B) in  2026 and then remain in the range of 4.5-4.1% in 2027.

The Central Bank's updated forecast for the remittances to GDP ratio  is projected to remain at 3.1% in 2025 (the same as 3.1% in 2024),  and then rise slightly to 3.3-3.2% in 2026 and remain at 3.2% in  2027, indicating a weak economic impact from remittances. The Central  Bank's 2025 forecast for budget revenues and expenditures remains  unchanged: expenditures will grow more significantly-from 2.9  trillion to 3.4 trillion drams-than revenues-from 2.4 trillion to 2.7  trillion drams. As a result, the state budget deficit will increase  from 376.1 billion to 599.8 billion drams. As a result, in 2025, the  ratio of the state budget deficit to GDP will increase from 3.7% to  5.4%, with a slight increase in the share of revenues in GDP from  23.5.8% to 24.1% and the share of expenditures in GDP from 29% to  30.7%. In 2026-2027, revenues will grow to 2.97-3.2 trillion drams,  and expenditures to 3.6-3.8 trillion drams. The state budget deficit  to GDP ratio will increase to 4.4-4.5% in 2026, decreasing to  3.4-3.5% in 2027. This increase will be accompanied by an increase in  the share of revenue in GDP to 24.2-24.9% and a decrease in the share  of expenditure in GDP to 29.5-30.3%. This trend will continue in  2027, with the share of revenue in GDP increasing to 24.3-25.1% and  the share of expenditure in GDP decreasing to 28.5-29.4%.  In this  report, the Central Bank of Armenia also updated forecasts for  economic development and inflation in the United States, the  Eurozone, and Russia, for oil and copper prices, and for the FAO  index. Thus, for the US economy, growth is expected to slow in 2025  to 2% (from 2.8% in 2024) and inflation to remain at 2.9%. The  Eurozone economy will slightly accelerate in growth in 2025 to 1.2%  (from 0.9% in 2024), with inflation weakening from 2.4% to 2.1%. The  Russian economy will stall in growth in 2025 to a stagnant 0.5% (from  4.3% in 2024), with inflation accelerating to 8.6% (from 8.4% in  2024). In 2026, US economic growth will slow to 1.8%, while that of  the Eurozone will also slow to 0.8%, and that of Russia will  accelerate to 0.9%. Inflation in the US will weaken slightly to 2.8%,  in the Eurozone to 1.9%, and in Russia to 6.1%. The price of oil,  according to the new forecast, will decrease from $80.5 in 2024 to  $69.4 per barrel in 2025 and then to $63.1 in 2026. The price of  copper will increase from $9,142 per ton in 2024 to $9,698 per ton in  2025 and then to $10,634 in 2026. The FAO Index, after declining from  124.5 to 122 in 2023-2024, will begin to rise in 2025, reaching  128.3, and then continue to rise to 131.3 in 2026. Copper prices will  then continue to rise in 2027, reaching $10,915. The FAO Index will  also accelerate, reaching 135.4, while the price of oil will decline  further, to $59.8 per barrel.

The IMF, in its December forecast, updated its expectations for  Armenia's GDP growth in 2025 by 5%, accelerating to 5.5% in 2026.  Moreover, the IMF forecasts a decline in Armenia's exports and  imports by 31.1% and 28.1%, respectively, in 2025, with growth  reaching almost equal levels in 2026-2.2-2.1%- and a further moderate  acceleration in growth rates in 2027 to 3.4-3.7%. The World Bank,  updating its forecast in November, expects Armenia's GDP growth in  2025 to be 5.2%, slowing to 4.9% in 2026 and 4.7% in 2027. Armenia's  draft state budget for 2025 projects GDP growth of 5.1%, while the  2026 state budget projects 5.4% economic growth. According to the  Statistical Committee of the Republic of Armenia, Armenia's GDP  growth, after accelerating in 2022 from 5.8% to 12.6%, began to slow  in 2023 to 8.3% and then to 5.9% in 2024, amounting to 10.2 trillion  drams (approximately $26 billion) in absolute terms. The GDP deflator  index also began to decline, after rising from 106.9% to 108% in  2022, to 103.1% in 2023 and to 101.4% in 2024. As a reminder, the new  Forecasting and Policy Analysis System (FPAS) adopted by the Central  Bank of Armenia serves to provide information and analytical support  for monetary policy decision-making and consists of all the elements  necessary for inflation targeting: data collection and processing,  monitoring the current economic situation, developing and refining  models, a monetary policy decision-making process, and an open  communications policy. The FPAS includes the process of developing  short- and medium-term macroeconomic forecasts to assess the state of  the economy and development prospects, which are used as the basis  for strategic monetary policy decisions. The 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 the Central Bank's potential actions  depending on the domestic and external economic situation, allowing  for key rate decisions based on the projected inflation rate and  other macroeconomic indicators.