World Bank says growth in Armenia to slow down to 1.9 percent in 2016
YEREVAN, April 8. /ARKA/. In its latest Economic Update: Impact of China on Europe and Central Asia the World bank says growth in Armenia is projected to slow to 1.9 percent in 2016, on the back of continued weaknesses in the external conditions and fiscal tightening.
It says with the recovery of the global economy, including metal prices, Armenia’s growth is expected to pick up over the medium term, but only moderately to about 3 percent a year, hampered by structural weaknesses. The budget deficit is projected to remain wide in 2016, at 3.9 percent of GDP, despite fiscal tightening through a combination of revenue raising measures and moderate expenditure cuts.
The fiscal position is expected to improve over time, as the stimulus measures are phased out and an economic recovery boosts revenue collection. Poverty reduction and income growth across all levels of the welfare distribution are likely to stagnate during 2017-18.
According to the World Bank, even under an optimistic scenario—the agricultural sector continues to perform well and remittance inflows recover—without substantial improvements in the business environment and the domestic labor market the poverty rate is projected to fall only gradually to 23.8 percent in 2018. The elimination of temporary electricity subsidies, scheduled in August 2016, would negatively affect poor households, whose expenditure of electricity amounts to more than 5 percent of total consumption. Risks and challenges Armenia’s economic outlook is subject to considerable downside risks.
It says sustaining growth in a difficult external environment with limited fiscal space is a serious policy challenge. Further deterioration of the external environment, including a worsening recession in Russia the slow recovery of base metal prices, represent significant risks to Armenia’s prospects for economic growth and job creation.
Furthermore, recent reshuffling in the government personnel and political developments slated for 2017-18 (Parliamentary and Presidential elections) could delay the implementation of structural reforms necessary to improve the business environment, thereby hindering productivity growth over the medium term.
As public debt continues to rise, the government has to consolidate fiscal position, while protecting critical expenditures in areas such as social assistance and public investment. Persistently low capital outlays, which bore the brunt of expenditure compression in recent years, and low execution rates of public investment could limit Armenia’s medium-term growth. Armenia’s fiscal sustainability could be also threatened by the deteriorating financial performance of the energy sector. -0-
It says with the recovery of the global economy, including metal prices, Armenia’s growth is expected to pick up over the medium term, but only moderately to about 3 percent a year, hampered by structural weaknesses. The budget deficit is projected to remain wide in 2016, at 3.9 percent of GDP, despite fiscal tightening through a combination of revenue raising measures and moderate expenditure cuts.
The fiscal position is expected to improve over time, as the stimulus measures are phased out and an economic recovery boosts revenue collection. Poverty reduction and income growth across all levels of the welfare distribution are likely to stagnate during 2017-18.
According to the World Bank, even under an optimistic scenario—the agricultural sector continues to perform well and remittance inflows recover—without substantial improvements in the business environment and the domestic labor market the poverty rate is projected to fall only gradually to 23.8 percent in 2018. The elimination of temporary electricity subsidies, scheduled in August 2016, would negatively affect poor households, whose expenditure of electricity amounts to more than 5 percent of total consumption. Risks and challenges Armenia’s economic outlook is subject to considerable downside risks.
It says sustaining growth in a difficult external environment with limited fiscal space is a serious policy challenge. Further deterioration of the external environment, including a worsening recession in Russia the slow recovery of base metal prices, represent significant risks to Armenia’s prospects for economic growth and job creation.
Furthermore, recent reshuffling in the government personnel and political developments slated for 2017-18 (Parliamentary and Presidential elections) could delay the implementation of structural reforms necessary to improve the business environment, thereby hindering productivity growth over the medium term.
As public debt continues to rise, the government has to consolidate fiscal position, while protecting critical expenditures in areas such as social assistance and public investment. Persistently low capital outlays, which bore the brunt of expenditure compression in recent years, and low execution rates of public investment could limit Armenia’s medium-term growth. Armenia’s fiscal sustainability could be also threatened by the deteriorating financial performance of the energy sector. -0-