NEW YORK – Armenia’s economy will grow a little more than 6 percent this year, after shrinking sharply last year, according to the World Bank.
“The economic recovery in 2021 was faster than expected and the economy is likely to return to pre-COVID levels by mid-2022,” the bank said in a report released this week.
“After a faster than expected recovery in [the first half of the year,] the forecast GDP growth rate for 2021 has been revised from 3.4 percent in April 2021 to 6.1 percent, ”it continues. The economic upswing will continue to be driven primarily by private consumption.
The International Monetary Fund has also signaled a significant improvement in its economic outlook for Armenia. A senior IMF official, Nathan Porter, predicted a 6.5 percent growth rate last month after having virtual conversations with Armenian officials.
The Armenian economy contracted 7.6 percent last year due to the coronavirus pandemic and the war with Azerbaijan.
The Armenian government had forecast a modest economic recovery by spring. It now expects significantly faster growth not only in 2021, but also in the years to come.
According to the government’s five-year program passed by parliament in August, GDP is expected to increase by 7 percent annually. And a draft state budget presented by Prime Minister Nikol Pashinyan’s cabinet last week obliges the Armenian tax authorities to increase state revenue by up to 25 percent by 2022. Not only would this fund a 15 percent increase in public spending, but it would also lower the country’s budget deficit, which widened significantly during last year’s recession.
However, the World Bank report says that Armenian growth is expected to slow to 4.8 percent over the next year and accelerate only slightly in 2023. He also lists “downside risks” for this scenario: “limited progress on COVID-19 vaccinations, rising COVID-19-19 cases, geopolitical tensions and a delayed recovery among key trading partners.”
The IMF porter warned similarly cautiously: “The downside risks remain heightened, among other things due to geopolitical tensions, a slowdown in foreign demand and increased volatility in the global financial markets.”