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EFSD highlights key risks for Armenia's economy

Armenia
Arshaluis Mgdesyan
10.07.24 12:15
45

Deputy Executive Director and Chief Economist of the Eurasian Fund for Stabilization and Development (EFSD), Sergey Ulatov, outlined the main threats facing Armenia's economy.

"Unlike other countries, we have another important issue - significant budget risks in Armenia associated with high expenditures aimed at minimizing certain shocks that occurred in the republic, including due to geopolitical factors," Ulatov noted during the presentation of the EFSD regional economic review, reported armbanks.am.

He mentioned that forecasts predict Armenia's budget deficit will be almost 5% in 2024 and 4.1% in 2026.

"The budget deficit will remain at an elevated level. Our funding gap estimates show that they will also increase. This means budget risks in Armenia will persist," the economist said.

Ulatov also highlighted the issue of the strong dram. "As you know, there was a significant, explosive appreciation of the dram in 2022. Currently, there is a gradual normalization of the exchange rate. However, we believe that the Armenian dram remains overvalued, so the risks of its devaluation persist if external economic conditions change drastically," Ulatov emphasized.

Additionally, Ulatov pointed out that increasing geopolitical tensions and the influence of the Russian factor remain key risks, as in many countries.

"A couple of years ago, we assessed the impact of the Russian factor, specifically Russian individuals, on Armenia's explosive economic growth and found that the influx of capital and labor resources from Russia contributed approximately 4% to economic growth. We see that there are risks that the influence of these factors will diminish, leading to slower economic growth. These risks remain," he concluded.

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