YEREVAN, May 14. /ARKA/. Armenian economy is to shrink by 3.5 per cent in 2020 because of the coronavirus, with a rebound of 5.5 per cent in 2021, the European Bank for Reconstruction and Development says in its macroeconomic report.
The EBRD analysts say in the report that despite strong household demand, inflation turned negative in the first quarter of 2020. With a relatively stable exchange rate combined with deflationary pressures, and in an effort to support domestic demand, the Central Bank of Armenia lowered the refinancing rate two consecutive times to 5.0 per cent in April 2020, the lowest rate since 2010.
In their opinion, the global uncertainty and decreasing demand resulting from the coronavirus crisis, combined with volatility in commodity prices, will affect the economy directly via a decrease in exports, which are dominated by copper and other mining products, and indirectly through economic links with Russia, including a likely downturn in remittances.
“Prolonged measures of social containment and low mobility would hurt Armenia’s tourism sector, which is largely dependent on visits from Armenians abroad,” they say in the report.
Assuming domestic containment measures are gradually relaxed, with return to normality during
the second half of the year, output in the EBRD regions is projected to contract on average by 3.5 per cent in 2020 followed by a recovery in 2021, with an average growth rate of 4.8 per cent in 2021. While this scenario assumes a modest impact of the crisis on the long-term trajectory of output, the pandemic may have significant longer-term economic, political and social impacts.
These estimates are subject to unprecedented uncertainty. If social distancing remains in place for much longer than anticipated, the recession may be much deeper, with the 2019 levels of output per capita not attained again for years to come.
On April 29, the National Assembly of Armenia approved the coronavirus-prompted revision of budget indicators. Given the adverse impact of the situation with the coronavirus, the budget forecast for GDP was revised to a decline of 2% (previously, a 4.9% growth was projected in the budget for 2020), and the deficit was increased to 340 billion drams, or 5% of GDP ( previously 2.3%).
In its spring Review of the Economics of Europe and Central Asia, the World Bank predicts that according to the optimistic scenario, the growth of the Armenian economy in 2020 will be 1.7%, and inflation – 3%. According to the forecast, in 2021, Armenia’s GDP growth will be 4.5%, and inflation – 3.5%. And for 2022, the Armenian economy is projected to grow at 4.7%, with inflation at 4%.
The International Monetary Fund expects a 1.5% decline in the Armenian economy in 2020. In its World Economic Outlook, April 2020), the IMF predicts that in 2021 a growth of 4.8% will be recorded in the Armenian economy.
The international rating agency Fitch Ratings predicts that the shock from coronavirus will slow down the growth of Armenia’s GDP from 7.6% in 2019 to 0.5% in 2020.
According to the latest Eurasian Development Bank’s forecast, in 2020 Armenia’s GDP growth is expected to slow down by 1.7%. -0-