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Asian Development Bank expects Armenia growth to slow to 4.3% in 2019

April 4, 2019
in Markets & Economy, Mobile Home, Newsletter
0
Asian Development Bank expects Armenia growth to slow to 4.3% in 2019

YEREVAN, April 4. /ARKA/. In its Asian Development Outlook 2019 the Asian Development Bank (ADB) says growth in Armenia is projected to slow to 4.3% in 2019 and then recover slightly to 4.5% in 2020.

It says risks to the outlook are broadly balanced and growth could strengthen with improved political stability, following an eventful 2018, and as a new government pledges to promote competition, combat corruption, enhance public services, and encourage entrepreneurship and innovation.

It says major downside risks stem from any growth slowdown in 2019 in the Russian Federation, Armenia’s main trade partner and destination for migrant workers; weaker mining output and diminished exports from lower prices for nonferrous metals; and preparations to repay a $500 million eurobond coming due in September 2020.

On the supply side, services should be the main driver of expansion, with lesser support from agriculture, industry, and construction. Services are projected to grow by 6.0% in 2019 and 5.5% in 2020, reflecting gains in wholesale and retail trade, finance, insurance, recreation, and transport and communications.

Agriculture is projected to rebound by 2.5% in 2019 and 3.3% in 2020, assuming more normal weather but also continued government-subsidized loans to farmers for hail nets, drip irrigation, intensive gardening, and leasing, as well as the success of a pilot agricultural insurance program that promises to encourage planting.

The ADB says also expansion in industry excluding construction will likely slow to 2.9% in 2019 before recovering to 3.6% in 2020. While low international copper prices and problems in mining will again weigh on the output and export of minerals, growth could benefit from higher demand for processed foods, pharmaceuticals, textiles, and footwear from Eurasian Economic Union partners and the Middle East. Tepid capital spending will likely keep growth in construction modest.

On the demand side, growth is expected to slow further for both investment and consumption. Fiscal consolidation including low capital outlays will likely limit gains in public consumption and investment, though private consumption and investment should find support in expected increases in remittances and tax changes to be implemented in 2019: the introduction of a flat personal income tax at 23% and lower profit taxes on small firms.

In addition, public debt engaged in 2018 but drawn down in 2019 will likely raise total public debt to about 58% of GDP. The current account deficit is projected to widen slightly to 6.9% of GDP in 2019 before narrowing to 6.1% in 2020 as higher income and service exports offset continued expansion of the trade deficit .

Export growth is projected to slip further to 6.0% in 2019 and then recover to 8.5% in 2020 on higher exports of agricultural products, textiles, precious stones, and metal products, even as mineral earnings remain weak.

Import growth will likely moderate to 8.2% in 2019 and 6.5% in 2020 but continue to outpace growth in exports as demand grows for consumer and capital goods. Gains in tourism and information technology (IT) will buoy net service inflows, while rising remittances are expected to boost net income and current transfers in the next years. International reserves are projected at $2.2 billion in 2019, rising in 2020 to $2.4 billion.

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