YEREVAN, May 8. /ARKA/. The World Bank predicts 4.1% GDP growth for Armenia in 2018 in its Cryptocurrencies and Blockchain: Europe and Central Asia Economic Update report. It says the 7.5% growth recorded in 2017 was mainly driven by a recovery in the external environment and was also supported by a strong rebound in domestic demand.
It also says the fiscal deficit narrowed slightly in 2017, to 4.7 percent of GDP (down from 5.5 percent in 2016), but remained wider than the budgeted deficit of 2.8 percent of GDP. While tax revenue increased by 7.3 percent year on year in 2017—driven by higher collections of excise taxes, customs duties and environmental taxes—as a percentage of GDP revenue declined by 0.8 percentage points compared with 2016.
According to the report, the strong performance in 2017 suggests the opening of a window of opportunity to undertake the reforms needed to make growth inclusive and sustainable. On the assumption of sustained favorable external economic conditions and robust structural reforms, medium-term growth is forecast to be around the potential growth rate (4 percent), supported by private-sector, export-led activity.
In particular, the agribusiness, information and communication technology (ICT), and tourism sectors are expected to deliver solid growth as efforts to boost competitiveness and connectivity start to deliver results. As the economy continues to grow and incomes rise—and remittance inflows continue to support livelihoods thanks to a benign external environment—the absolute poverty rate is forecast to decline to 8.1 percent in 2020. Although price pressures are forecast to increase in the short term, mainly due to higher customs duties and excise taxes on fuels starting in 2018, inflation is projected to remain within the official target range.
The report says the new Tax Code, which becomes fully effective in 2018, lays the foundation for better tax administration and higher tax revenues. Implementation of the upgraded fiscal rule (approved in December 2017) will result in stronger discipline for current spending and will provide some room to increase growth-friendly capital expenditures while also stabilizing and eventually reducing the public debt. Risks and challenges Armenia’s vulnerability to economic conditions in Russia and its other trading partners—as well as its low level of export diversification—will remain high.
The Asian Development Bank in its Asian Development Outlook 2018 said it expects Armenia’s economy to grow by 4% in 2018, and by 4.2% in 2019. The European Bank for Reconstruction and Development in its latest Regional Economic Prospects in the EBRD Countries of Operations November 2017 forecasts a 3.5% growth for 2018. The government projection is 4.5%.-0-