The headwinds associated with the Ukraine conflict and sanctions on Russia have caused Fitch Ratings to revise down its growth projection for Armenia for 2022 sharply to 1.3% (previously 5.3%), as export growth (particularly to Russia) stalls, and remittances (and hence household consumption) decline.
‘We project growth will return to 4.2% in 2023 ('B' median: 3.6%), reflecting favourable domestic investment prospects and an expected positive contribution of net trade,’ the agency said in a press release last week.
Fitch says that Russia accounted for 28% of goods exports, 37% of imports, and 40% of tourism arrivals, foreign direct investment, and remittances for Armenia as of 2021. The immediate impact of sharply higher natural gas prices will be limited, given that Armenia has locked in gas import prices with Russia as of December 2021, for multiple years. Some disruption to trade relationships is likely given the loss of correspondent banking relationships of Russian banks operating in Armenia. Russia's deep recession and the large depreciation of the Russian ruble will hit Armenian exports.
Armenian Economy Minister Vahan Kerobyan said in a last week interview with CivilLet that the government did not revise its growth forecast for 2022, which is set at 7%, and the inflation is set at 4% (± 1.5%).
Last week the Central Bank, however, revised down its earlier growth projection from 5.3% to 1.6% citing the problems triggered by the Russian-Ukrainian conflict, ARKA reports.
