ADB says Armenia’s economic outlook highly uncertain

PanARMENIAN.Net - Developing Asia will maintain its strong economic growth in 2015 and 2016 supported by soft commodity prices and recovery in the major industrial economies, says a new Asian Development Bank (ADB) report.

“Developing Asia is making a strong contribution to global economic growth,” said ADB Chief Economist Shang-Jin Wei. “Falling commodity prices are creating space for policy makers across the region to cut costly fuel subsidies or initiate other structural reforms. This is a key opportunity to build frameworks that will support more inclusive and sustainable growth in the longer term.”

The report says that regional geopolitical developments leave the economic outlook highly uncertain in Armenia. The slowdown in the Russian Federation, caused in particular by sanctions and lower oil prices, will likely further depress the Armenian economy. Growth is thus expected to slow again, to 1.6% in 2015, before recovering to 2.3% in 2016.

It said Armenia saw remarkable economic growth and poverty reduction in the period preceding the global financial crisis of 2008–2009. However, growth has slowed steadily since then, and the economy remains vulnerable to new setbacks. To minimize the impact on Armenia of the slowdown in the Russian Federation and to leverage the benefits of EEU membership, domestic sources of growth need attention. Requirements include broader efforts to develop the private sector, a stronger emphasis on agriculture and rural development, and higher capital investment in infrastructure. Growth will be more inclusive and sustainable if development objectives are pursued with the private and public sectors assuming complementary roles.

Weak oil prices and recession in the Russian Federation pushed subregional growth in Central Asia down 1.5 percentage points to 5.1% in 2014. In 2015 growth will slacken in Kazakhstan, Turkmenistan, and Uzbekistan as lower petroleum exports constrain domestic spending. The weak economy in the Russian Federation will curb export and remittance flows, slowing growth in Armenia, Georgia, the Kyrgyz Republic, and Tajikistan. Average growth in the subregion is forecast at 3.5% in 2015 and 4.5% in 2016.

Growth in the United States (U.S.), where recovery seems to have turned a corner, is leading major industrial economies. While signs are mixed in the euro area and Japan, soft oil prices and accommodative monetary policy will support growth. As a group, these economies are forecast to expand by 2.2% in 2015, up 0.6 percentage points from 2014, and 2.4% in 2016.