In the short term, we should expect a further slowdown in the growth of the Armenian economy
Until the end of 2018, GDP growth rates in Armenia are likely to remain lower than in the first half of the year. This is stated in the next monthly, October, report of the EDB <MacroBaz>. Nevertheless, according to the results of 2018, according to the EDB forecast, the growth of the Armenian economy will remain at a rather high level and will be 5.9% compared to 2017.
The main reason for the slowdown in GDP growth, according to analysts of the Bank, is the decline in agricultural production due to adverse weather conditions affecting crop production for the current year in crop production. The growth of the economy is also constrained by a decrease in ore mining volumes against the background of increasing requirements for compliance with environmental standards in the current year. The impact of low yields and lower ore output on economic activity was partially offset by accelerated growth in trade and, to a lesser extent, investment growth.
Industrial production continues to make a positive contribution to GDP growth. Strong results are still demonstrated by food production (an increase in September of 14.0% y / y after 18.1% y / y in August). At the same time, the restraining factor in the industry was the decline in output in metallurgy, where the fall in volumes in September was 8.3% y / y.
The composite leading indicator, calculated by the EEC, indicates a further slowdown in the growth of the Armenian economy in the short term. Among the slowing down factors, there is a decrease in the volume of remittances of individuals to the country compared with 2017, as well as with the dynamics of production in metallurgy. In the coming months, the metallurgy industry may still experience negative annual growth rates due to more restrained industrial activity in the industry compared to the same period of the previous year. In 2019, economic growth will be supported by the resumption of growth in agriculture and, in the event of a resumption of activity under suspended projects, the restoration of investment in ore mining. Inflation is supported by a relatively high increase in food prices, which reached 5.3% y / y due to low yields. At the same time, the rise in prices for non-food products and services in September continued to slow down and amounted to 3.9% y / y, helped by a slight decrease in prices for fuel and lubricants. Until the end of 2018 and in early 2019, the stabilization of prices in the food and fuel markets can have a restraining effect on inflationary processes. The Central Bank of Armenia does not expect inflation to significantly higher than 4% of the target level during 2018-2021. Under these conditions, the CBA leadership left the refinancing rate at 6% following the results of the meeting of the governing council on September 25.
EDB analysts remind that Armenia has improved its position in the Doing Business 2019 rating issued by the World Bank. Armenia occupied the 41st place, having advanced six positions. Improvements have occurred, primarily in terms of ease of connection to power grids, protection of minority investors, taxation and enforcement of contracts.