Armenia benefits greatly from influx of capital and IT specialists -  EBRD chief economist

ArmInfo. Beata Javorcik, Chief Economist at the European Bank for Reconstruction and Development  (EBRD), clarified what caused the "optimism" of the EBRD, which in  its latest report forecasted a 6.2% growth of the Armenian economy,  answering a question from an ArmInfo correspondent. 

Thus, the Bank's expectations for Armenia's GDP growth exceeded the  expectations of other international financial institutions.

Notably, the EBRD in its latest Regional Economic Prospects. Taming  inflation report, published on May 15, improved the forecast for  Armenia's GDP growth for 2024 from the previous 4.5% to an updated  6.2% (against the actual 8.7% growth in 2023), expecting a slowdown  to 4.8% in 2025. Meanwhile, in their April reports, both the IMF and  the World Bank improved the forecast for Armenia's GDP growth for  2024 to 6% and 5.5%, respectively. At the same time, both the IMF and  the World Bank expect Armenia's GDP growth to slow to 5.2% and 4.9%  in 2025, respectively.  The Asian Development Bank forecasts 5.7%  economic growth for Armenia in 2024, with the rate accelerating to 6%  in 2025.  The forecasts of international rating agencies for  Armenia's GDP growth for 2024 are as follows: S&P Global Ratings  expects the pace to slow down to 6.2%, and Fitch Ratings - to 6%.   The Eurasian Development Bank forecasts Armenia's GDP growth by 5.7%  for 2024.  The Central Bank, having switched to a new monetary policy  development system (FPAS MARK II), from 2024 began to calculate the  GDP forecast for several scenarios and indicate the expected growth  not at one specific level, but in a range. In particular, according  to the forecast of the Central Bank of Armenia, GDP growth in 2024  will be in the range of 5.3-6.4%.

"The countries of the region, including Armenia, recorded a  significant inflow of funds in 2022 due to the relocation of citizens  and businesses; Many of the immigrants were highly qualified IT  specialists," Beata Javorcik said on May 16 at a press conference  following the 33rd Annual Meeting of the Bank in Yerevan. According  to her, this influx of citizens was equal to 2.5 percent of the  population of Armenia, and the number of employees in the IT sector  doubled in 2022.

"That bears fruit in the form of dividends; services are exported,  including in the IT sector, which has a positive impact on the  foreign trade balance and the current account deficit, which is  structural for Armenia, reaches 2% as a result," she noted.

In addition, according to the EBRD's chief economist, the spending of  funds by the Armenian government on the integration of refugees from  Nagorno Karabakh has also stimulated economic activity. "We expect  that it will also affect the economy in the future," she said

In the medium term, Armenia can play the role of a bridge country,  which can become a channel of trade between those blocs that are  rapidly emerging in the international economy.  As for the slowdown  in China's economy, which could also affect the situation in region,  then, according to Beata Javorcik, nevertheless, it is still growing  at 5%. In this sense, this cannot somehow affect the growth rates of  the Armenian economy and forecasts.  When asked what the further  deterioration of Armenian-Russian relations means for the Armenian  economy and how, in a worst-case scenario, possible trade  restrictions will affect it, the EBRD chief economist said that  although the Russian market is important for the Republic of Armenia,  Armenian goods are no less important for Russia.