Damage to Armenian economy from coronavirus to amount $ 1.53 billion, GDP to shrink more than 11% - former economy minister

06.04.2020 13:15
Damage to Armenian economy from coronavirus to amount $ 1.53 billion, GDP to shrink more than 11% - former economy minister

YEREVAN, April 6. /ARKA/. The damage to the Armenian economy from the coronavirus in the base scenario will amount to $ 1.53 billion (or 11.2% of the 2019 GDP), according to a study by Vahram Avanesyan, a former minister of economy of Armenia, published on the website of the Russian-Armenian University

In recent days, the Central Bank of Armenia released a forecast, according to which economic growth in Armenia amid the spread of coronavirus and anti-epidemic measures in 2020 will significantly decrease to 0.7%. In the government budget, economic growth in Armenia in 2020 is projected at 4.9%, and inflation at 4% (± 1.5%).

Armenian Economy’s COVID 19 Losses

Vahram Avanesyan says in his study that, according to the National Statistics Committee of Armenia, GDP in 2019 amounted to $ 13.636 billion, and the number of employees (excluding the agricultural sector) is 782,000 people.

He says labor productivity (without the agricultural sector) amounted to $ 19.571.

The number of employees (excluding the agricultural sector) who do not work under isolation conditions is 486,000 people.

It is estimated that per-day GDP loss will be $ 51.14 million. Losses from the reduction in remittances are estimated at $ 506.11 million, for compensation to employees - $ 280.71 million, private transfers - $ 225.4 million.

“Armenia’s economy has one important characteristic which makes it more vulnerable to external shocks originating in Russia In addition to the assessment of economic impacts of the internal lockdown and isolation measures, in Armenia case, it is important also to evaluate the coronavirus impact on remittances from migrants working predominantly in Russia, which make up about 9% of Armenia’s GDP,” Avanesyan says in his study.

He also says that as both Russia and Armenia have imposed travel bans, most vulnerable will be situation with working migrants. In 2018 net primary income from working migrants amounted to $657 million.

The coronavirus-inflicted damage to Armenia’s GDP in 2020 is estimated to amount to $ 280 million, if the main travel restrictions remain in effect for 120 days.

In respect of private transfers (490 million USD), main losses for Armenia’s economy will come from depreciation of Russian ruble and reduced population incomes due to coronavirus impact.

The study also says that since agricultural products in Armenia are predominantly produced by small family farms, the reduction in labor productivity and employment in isolation will not affect agriculture. Some 780 thousand people or 26% of the population are employed in other sectors of the Armenian economy.

A state of emergency is in force in Armenia from March 16 to April 14. Restrictions on free movement and certain types of economic activity in Armenia in the state of emergency (initially introduced for the period from March 24 to March 31) were extended until April 12 inclusive.

As of April 6, there were 833 confirmed cases infection with the coronavirus in Armenia as well as 62 cured and eight dead patients.

Losses of GDP worldwide exceeded $ 250 billion per day

Losses of GDP (direct, indirect and induced) due to restrictive government policies to prevent the spread of coronavirus worldwide amounted to more than $ 250 billion for each working day or 0.3% of global GDP.

Direct losses are estimated based on the calculation of the number of people employed in lockouts and labor productivity. In addition to the direct consequences, there will be various indirect and induced losses caused by a decrease in domestic demand in the supply chain; lower domestic demand caused by reduced household incomes. A decrease in external demand due to a decrease in production volumes in partner countries is also expected as well as a decrease in external demand resulted from travel bans and a decrease in external demand caused by interruptions in cargo transportation and so on.

According to the outlook of the international rating agency FitchRatings, published on April 2, the global economy in 2020 is waiting for a recession and a decrease in economic activity to 1.9%. The GDP of the United States, the Euro zone and the United Kingdom will drop to 3.3%, 4.2% and 3.9%, respectively. China's economic recovery will be severely limited by the global downturn, and economic growth could be below 2%. -0---


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