EBRD REVISES GDP FORECAST FOR ARMENIA FOR 2010 FROM 2% TO 10%
Arminfo
19.05.2010
ArmInfo. European Bank for Reconstruction and Development (EBRD)
has revised GDP forecast for Armenia for 2010 from 2% to 10% in
the updated WEO "Regional Economic Prospects in EBRD Countries of
Operation". Thus, EBRD forecasts 3% GDP growth for Armenia in 2011.
Average annual inflation is expected at 7% versus 3.4% in 2009. GDP
growth for Q1 2010 totaled 5.5% as compared to the same period of
2009. EBRD forecasts 11.7% GDP growth for Q2 2010l, an 8.1% growth
for Q3 and 12.9% growth for Q4.
"Country-specific developments related to political turmoil (Kyrgyz
Republic) and trade shocks (Turkmenistan) also warrant downward
revisions in growth projections for 2010. At the other extreme lie
Turkey and Armenia where much faster recoveries appear to be underway,
backed by restocking, government demand, a projected recovery in
capital inflows (Turkey) and rising copper prices and remittances
(Armenia)," the report says. "Armenia has seen an exceptionally sharp
output contraction as remittances fell, and the remittances-fuelled
construction boom came to an abrupt halt. Preliminary data suggest
that vigorous growth has returned in recent months following growth
in remittances, an agreement on an IMF programme and substantial
financing from other IFIs and bilateral donors."
"In Russia, the growth momentum of late 2009 is likely to be sustained,
implying a growth of about 4.4 per cent in 2010 (after a 7.9 per cent
reduction in 2009). With real incomes increasing again, asset quality
deterioration in the banking sector is levelling off and remains
manageable under our baseline scenario, also given the dominance of
the state in the banking system," the report says.
"Reflecting upward revisions in growth forecasts in several of the
region’s largest economies, the average regional growth projection for
2010 has been revised up to 3.7 per cent from 3.3 per cent in January.
The upward revisions mostly affect commodity exporters (Russia,
but also Armenia and Mongolia) and recipients of renewed capital
inflows (Ukraine, Poland, Turkey, and Hungary). Upside risks mainly
arise from a stronger than projected increase in external demand,
along with improvements in domestic fundamentals. Loose monetary
policy in the Eurozone and restocking may yet translate into faster
growth. If this were to occur, several countries in the region would
benefit both from expanded trade opportunities and from capital
inflows in search of higher yields. Inflation remains low, and some
countries that experienced large depreciations continue to benefit
from improved competitiveness, positioning them well for a recovery
in external demand. Finally, several countries, including Hungary,
have established multi-year fiscal consolidation programmes, which
– if implemented – could meaningfully set them apart from fiscally
weaker EU countries. Most transition countries have begun to recover,
but the pace of recovery remains slow on average, with increasing
divergence across countries, and is now being overshadowed by
Eurozone market volatility and increasing pressures to accelerate
fiscal consolidation in East and West. In light of this, the path
of recovery is exceptionally uncertain, with risks skewed to the
downside in the short run, and more symmetric risks to both the
upside and downside over the medium term. The recovery has begun, but
remains fragile, and is generally expected to be slower than in other
emerging market regions. A sluggish recovery in the European Union,
the region’s main trading partner, is dampening the potential for an
export-Real GDP Growth, 2008-2011 driven rebound. The deep recessions
of late 2008 and 2009 continue to have knock-on effects in the form
of high non-performing loans and unemployment, which constrain credit
growth and the recovery of domestic demand. Crisis-induced deficits
and limited sovereign market access will require fiscal consolidation
in many countries," the report says.