The European Bank for Reconstruction and Development (EBRD) said in its latest report "Regional Economic Prospects (September 2023) it expects Armenia's economy to grow by 6.5% in 2023 and slow down to 4.5% in 2024.
In its previous update in May, the EBRD forecasted that Armenia's economy would grow by 5% in 2023, remaining at that level in 2024.
The review notes that Armenia's economy continued to perform exceptionally well in 2023, but the first signs of slowdown are already visible.
Between January and July 2023, GDP growth reached 10.4% year-on-year, driven in particular by the strong performance of the services sector. Net remittance inflows, which drive demand for services, fell by 10% year-on-year in the first half of 2023, but growth in exports and imports of goods remained strong. The exchange rate and foreign exchange reserves have been broadly stable since early 2023, according to the latest update.
"At the same time, inflation fell below zero in July 2023, helping to reverse the appreciation of the real effective exchange rate seen over the past two and a half years. The Central Bank of Armenia began a gradual reduction in the discount rate, implementing two 25 basis point cuts in June and August 2023, bringing the discount rate to 10.25%," the report says.
Analysts said growth is likely to slow in the second half of the year as the temporary factors that contributed to double-digit growth in Armenia's economy are fading away.
"Geopolitical developments remain an important source of downside risks. The isolation of Russia, Armenia's main trading partner, from Western markets could have negative long-term consequences for Armenia's economy. Further escalation of the conflict with Azerbaijan represents another serious risk to economic prospects. On the other hand, progress in opening the land border with Turkey could bring economic benefits in the medium term," the report says.
Overall, according to the review, the economies of the Eastern Europe and Caucasus region have adapted to external shocks caused by the events in Ukraine. The region's GDP is projected to grow by 1.9% in 2023 and 3.1% in 2024.
Armenian government’s growth projection for 2023 is 7%; the inflation is expected to be 4% (±1.5%). Armenia's economic activity in the first 7 months of 2023 upped 10.4% year-on-year.
Fitch predicted for the Armenian economy 6.1% growth in 2023, Moody's forecast is 7%, and that of S&P is 7.5%.
The World Bank estimates that Armenia's GDP growth will be 4.4% this year, the EDB expects it to grow by 7.5%, the EBRD’s growth forecast is 5%, and that of IMF is 5.5%, ARKA reports.
