All EEC economies are expected to generate positive growth in 2017, the European Bank for Reconstruction and Development said in a report on the Regional Economic Prospects in EBRD Countries of Operations in November 2016.

The EBRD leaves the growth forecast for Armenia unchanged at 2.0 per cent in 2016 and 2.0 per cent in 2017.

“Armenia’s economy made a good start in 2016 but growth slowed in the second quarter; GDP growth decelerated from 4.5 per cent year-on-year in the first quarter to 1.5 per cent year-on-year in the second quarter of the year. In the first half of 2016, growth in exports and government consumption was offset, in part, by contraction in gross fixed capital formation and household consumption. Deflation in the first eight months of 2016 reflected weak domestic demand and low import prices. Armenia’s economy remained exposed to spill-overs from the recession in Russia. In the first half of 2016, net FDI inflow was low and remittances declined, albeit at a lower rate than in 2015. The current account deficit remained contained in the first half of 2016 after sizable adjustment in 2015 which was driven by a reduction in imports. In the first nine months of 2016, the dram was mostly stable vis-à-vis the US dollar,” the report reads.

“International reserves provided approximately five months of import coverage as of September 2016. Tax and customs revenues were affected by deflation and by decreased nominal value of import flows. The fiscal deficit is expected to widen in 2016 on the account of revenue shortfall, followed by fiscal consolidation in 2017. In response to slowing growth, negative inflation and a stabilizing exchange rate, the Central Bank of Armenia gradually lowered refinancing rate from 10.50 per cent in August 2015 to 6.75 per cent in September 2016. In the first seven months of 2016, commercial bank lending remained mostly flat in the context of weak domestic demand and continued consolidation in the banking sector. The conflict in the Nagorno-Karabakh region presents a risk to the growth outlook. Our growth forecast for Armenia is unchanged at 2.0 per cent in 2016 and 2.0 per cent in 2017,” the EBRD said.