YEREVAN, May 14. /ARKA/. Armenia’s Central Bank said it expects a significant economic decline in the coming months.
The country’s economic activity in the first quarter of 2020 grew by 4% on the back of high growth rates reported in January and February, however, in March, it dropped due to the consequences of coronavirus shock. The only exception was the agricultural sector, which suffered relatively less, maintaining the positive trends of January and February.
Construction, accommodation and catering, transport, as well as travel agencies and other services were affected most by the Covid-19 pandemic.
The first quarter figures indicate that the economic growth will be quite lower than the ones laid down in the baseline scenario due to a larger than expected decline in the construction sector.
“The negative impact on economic activity is due to both demand and supply factors, which is why a significant economic decline is expected in the coming months,” the Central Bank said.
It said also that the economy is expected to gradually recover in the second half of the year, but gross demand will remain weak for the time being, even in the face of significant fiscal stimulus provided for by the unchanged budget program.
On April 29 Armenian Parliament approved a revision of the state budget for 2020 to offset the consequences of the COVID-19. The originally projected GDP growth of 4.9% was reduced to 2% Also, the original GDP volume of 7.095 trillion drams was reduced to 6.485 trillion drams and the earlier projected deficit budget of 160.7 billion drams was raised to 324 billion drams.
The changes will not affect the budget spending items. The share of tax revenues in GDP will drop from the earlier projected 22.6% to 22.1%. More precisely, under this scenario, tax revenues will drop by 169.1 billion drams to 1 trillion 433 billion drams.
Also, as a result of budget redistribution and taking into account the assistance package of 150 billion drams, the state budget deficit will grow to 5% of GDP from the previous 2.3%. The government will need to secure additional funding of 260 billion drams, he said.-0-