The Forecast of economic growth in Armenia

5 m.   |  2019-10-22

International entities are optimistic

International forecasts on Armenian economy have been improved

F inancial-economic international entities significantly improved economic growth forecasts for Armenia. If in the beginning of this year, 4-4.5 % economic growth was forecasted for 2019 in Armenia, now these forecasts have increased to around 6%. International entities, have reduced the forecast growth for the other countries in the region, except for Armenia.

International organizations also predict, that in line with the economic growth, there will be a 4% decrease in poverty and 1% decrease in the unemployment rate for the next two years.

World Bank

T he World Bank (WB) published a report on “Armenia’s Macroeconomic Development” in October 2019 with the predicted level for Armenia’s economic growth. In particular the predicted 4.2% GDP growth was raised to 5.5%. At the same time, the growth forecasts for 2020 and 2021 also have been raised by 5.1% and 5.2% respectively.

In parallel to the accelerating economic growth predicted by the World Bank, the poverty should continue to recede and will reach 7% in 2021 (it was 12.3% in 2017)

According to the World Bank forecast, the expected smaller fiscal deficit will in the near future allow to reduce public debt/GDP ratio, which will be reduced by 50.6% in 2021 instead of 55.8% in 2018. At the same time based on the forecast, the current account deficit, that is the difference between goods’ export and import will also reduce by -6.3% in 2021, instead of the -9.4% in 2018.

WB has also predicted foreign investment growth in Armenia. According to the report, just the volume of the broad-based direct investment will increase for the next few years forming 2.3% of the GDP in 2019 compared to last year’s 2%.

Unlike the positive forecast for Armenia, the World Bank has reduced predicted overall GDP growth for the South Caucasus in general (Armenia, Georgia, Azerbaijan) for 2019-2021. In the report published in June, the WB forecasted 2.8% growth for 2019, instead of an expected 3.3% growth in Azerbaijan. The forecasts for Azerbaijan for the 2020 and 2021 year are not positive, with -1.2 and -1.6 percentages respectively. Economic growth forecasts have become worse for Georgia as well with a -0.2% for 2019 and -0.5% for the next two consecutive years.

International Monetary Fund

A ccording to “World Economic Outlook. 2019” report published by the International Monetary Fund released in October economic growth forecast for Armenia with an increase to 6%, raised by 1.4 percentage compared to the report released in April. Based on the report, the economic growth forecast for 2020 has also been increased from 4.5% to 4.8%. According to IMF forecasts, the unemployment rate in Armenia will decrease up to 17.5% instead of the 18.2% recorded in 2018. The IMF also forecasts moderate increase in consumer prices in Armenia: 1.7% for 2019 and 2.5% for 2020. The IMF predicts a decrease in Armenia’s current account deficit by up to -7.4% compared to -9.4% recorded in 2018.

As to Armenia’s neighboring countries, the IMF has reduced the economic growth forecasts for them as well. Generally the economic growth rate decreased to 2.7% for the current year instead of the previously mentioned 3.4% growth rate for Azerbaijan. The predicted 3.1% growth for 2020 has been decreased to 21%. As for Georgia, the 2019 forecast remained the same at 4.6%, though 4.8% growth is expected instead of 5% growth for 2020.

Other Entities

M ore recently, the Asian Development Bank (ADB) also raised forecasts for Armenia’s economic growth, predicting 4.8% growth instead of 4.3% for 2019. For 2020, the ADB forecasts a 5.5% growth which has remained unchanged.

At the end of August, the Moody’s international credit rating agency raised Armenia’s sovereign rating from B1 to Ba3, predicting that Armenia’s economic growth will remain high for the medium term, remaining in the range of 5.5-6 percentage during the next few years. 

Central Bank of Armenia’s forecast 

Central Bank of Armenia forecasts 6.9$ economic growth for 2019.

Economic indicators in Armenia between January-August, 2019

Currently the economic results of Armenia exceed international forecasts. The economic activity has been increased by 7% between January-August of this year compared to last year results. The economic sphere achieve the largest growth in the service sector (15.5%) and industry (9.5%). Among the most important achievements for the new Armenian economy is the 10.4% growth in industry and 31.6% growth in housing and public catering. The latter is the result of a direct impact of tourism increase with hotel and restaurant businesses.