EBRD forecasts 3.5 percent GDP growth in Armenia in 2017 and 2018

The European Bank for Reconstruction and Development has sharply raised growth forecasts on Tuesday for the 37 countries in which it operates, saying improving exports, a revival in investment and firmer commodity prices were supporting a broad upswing.

In Armenia, economic growth has regained momentum in the first half of 2017, after coming almost to a standstill in 2016. GDP expanded by 6.5 per cent year-on-year in the first quarter of 2017 and by a further 5.5 per cent year-on-year in the second quarter, the bank said in a new report.

The rebound was supported by strong export performance and a recovery in money transfers to Armenia, which followed three years of contraction.

On the other hand, contraction in the agricultural output and construction continued in the first nine months of 2017. Consumer price inflation slowly increased to 0.6 per cent year-on-year in the first nine months of 2017 amid monetary policy relaxation and recovering household consumption.

Ongoing fiscal consolidation aims to put public debt on a declining trajectory. The budget deficit is planned to go down from 5.6 per cent in 2016 to around 3.0 per cent of GDP in 2017, mainly through lower public investment.

The banking sector is well-positioned to expand lending to the economy following a successful recapitalization. Economic recovery in the main trading partners is expected to bolster growth in Armenia, but the economy remains exposed to several risks, including volatility in the commodity markets.

“The conflict in the Nagorno Karabakh region presents a risk to the growth outlook. We forecast Armenia’s economy to grow by 3.5 per cent in both 2017 and 2018,” EBRD said.

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