EDB expects low inflation in Armenia to remain in 2020

30.03.2020 13:46
EDB expects low inflation in Armenia to remain in 2020

YEREVAN, March 30. /ARKA/. In 2020, Armenia’s GDP growth will slow down to 5.6% due to the exhaustion of the effect of a low comparison base in the ore mining sector as well as a reduction in net exports caused by weak external demand, the Eurasian Development Bank’s division for analyses said in its review.

In 2019, the growth of the Armenian economy speeded up to 7.6%, from 5.2% a year earlier thanks to some expansion of household consumption and a rally in the mining industry.

"This year, economic activity will be supported by positive dynamics in the processing and construction sectors, as well as the restoration of production in agriculture. Bank experts believe that the stimulating effect of fiscal and monetary policies on domestic demand will serve as an additional factor in economic development. The bank’s analysts expect GDP growth in the medium term to be near the potential level estimated at about 5%. Economic activity will be determined by the dynamics of labor productivity and investment demand. In the long term, the economy will strengthen also thanks to the improvement of business and investment environment in the country along with the implementation of the government’s structural reforms,” the bank says in its report.

According to the report, last year’s inflation slowed down to 0.7% thanks to the strengthening of dram against the currencies of countries - major trading partners and due to the weak external inflationary background as well as peculiarities of the structure of consumption and pricing at commodity markets.
The Eurasian Development Bank’s forecast assumes that inflation will remain low in 2020 due to weak pricing and slow economic growth in the countries - the main trade partners of Armenia.
According to the authors of the review, in short term, the risks of weakening business activity due to a decrease in both demand and supply as a result of the consequences of the coronavirus pandemic dominate in the country.

"Reducing cross-border cargo transportation can lead to interruptions in the supply of intermediate consumption commodities. Measures to prevent the spread of the virus can have a negative impact on business activity. Bank experts believe that industry, trade and services such as culture, entertainment and leisure, accommodation and catering, are the most vulnerable areas," the review says.
In Armenia’s government budget for 2020, economic growth is projected at 4.9% and inflation at 4% (±1.5%). Armenian Vice-Premier Tigran Avinyan didn’t rule out that the outlook can be revised because of the situation with coronavirus.

The Eurasian Development Bank is an international financial organization established by Russia and Kazakhstan in January 2006 with to promote the development of a market economy of the participating countries, their sustainable economic growth and the expansion of mutual trade and economic ties. The organization's registered capital is $ 7 billion. The bank's member states are Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan. -0---

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