EBRD: Armenia’s GDP To Shrink By 3.5% In 2020, With Rebound Of 5.5% In 2021.

The European Bank for Reconstruction and Development (EBRD) has predicted a 3.5% decline in Armenia’s economy in 2020, inspiring positive hopes of a 5.5% rebound for the coming year.

In a recently released report projecting the economic dynamics across the region, it projected a severe impact of the coronavirus crisis especially in Eastern Europe and the Caucasus.

The EBRD cited the tightening global financial markets, strong pressure upon domestic foreign exchange and reduced foreign demand for exports as major contributing factors, highlighting also the reduced domestic demand and lower commodity prices. The bank noted that the latter factor “puts additional strain” on Ukraine, Azerbaijan and Armenia as exporters of hydrocarbons and metals, adding that an expected drop in remittances “will likely further suppress household disposable income in most countries in this region, especially in Moldova, Armenia, Ukraine and Georgia”.

“Economic growth in Armenia accelerated to 7.6 per cent in 2019, driven by the significant increase in the consumption of households and supported by stronger export growth. The increase in consumption was led by household credit, up by 30 per cent in 2019, and by a 10 per cent increase in money transfers from abroad. On the production side, growth was led by the manufacturing and financial sectors, closely followed by domestic trade. The resumption of operations at one of the mines helped support expansion of exports. 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. 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. We project the Armenian economy to shrink by 3.5 per cent in 2020, with a rebound of 5.5 per cent in 2021,” reads the analysis.

The full text of the EBRD report can be found here.

H/T Tert

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