Republic of Armenia. Recent social and economic trends and short-term prospective. May 2020

16 June 2020

In 2019, real GDP growth accelerated to 7.6% from 5.2% a year earlier due to faster growth in consumption and exports of goods and services. The largest contribution to the growth of the economy was made by consumption as a result of a significant increase in consumer credit and real wages. The contribution of exports was mainly due to the growth of exports of metals and products made from them (precious metals, copper) as a result of the resumption of work of large metal rolling and mining enterprises after a long downtime, as well as alcoholic beverages. At the end of the year, 12-month inflation in Armenia slowed from 1.8% to 0.7%, and core inflation – from 2.6% to 0.7%, which goes against the forecasts of the Central Bank, which predicted a smooth approach of inflation to the target level of 4±1.5%. The largest slowdown in inflation was observed in the food segment, including due to lower prices for imported food against the background of some strengthening of the nominal exchange rate of the dram. High economic growth and improved tax administration resulted in the budget deficit decreased to 1.0% of GDP from 1.8% a year earlier. Despite the deterioration in the terms of trade, the current account deficit improved slightly due to an increase in traditional exports and economic growth. Armenia's economic growth prospects depend to a large extent on the dynamics of the Covid-19 pandemic, which has already had a very negative impact on the global and regional economy through disrupting global production and trade flows, reducing global demand, and reducing investment and consumer activity.