In a significant downward revision of its earlier projections, the World Bank said on Tuesday that economic growth in Armenia will likely slow to just under 1 percent this year due to spillover effects of a recession in Russia.
The bank forecast late last year that the Armenian economy will expand by 3.5 percent in 2015 -- as fast as it did in 2014, according to official statistics. The Armenian government was even more upbeat, forecasting a growth rate of 4.1 percent.
Laura Bailey, the head of the World Bank’s Yerevan office, said that the figure is unlikely to exceed 0.8 percent. She warned that even this growth projection could prove overly optimistic in case of a deeper-than-anticipated crisis in Russia or renewed drastic fluctuations of the Armenian dram’s exchange rate.
“I don’t have a forecast for what will happen with the dram,” Bailey told a news conference. “What I am trying to communicate is that if there were sharp, abrupt changes either direction, that can be disruptive to exports and trade.”
“That’s what we worry about, not as much whether the dram were to weaken a bit more gradually or strengthen but the sharpness,” she said, cautioning against a repeat of a brief currency crisis that hit Armenia in December.
The Armenian currency weakened by roughly 18 percent against the U.S. dollar in November and December amid falling remittances from Armenians working abroad and Russia in particular. Its exchange rate has been largely stable so far this year.
Deputy Prime Minister Vache Gabrielian seemed to acknowledge on Monday that the government too will have to revise its projections downwards. “The government has never said that there will be no changes in the [forecast] indicators,” he told reporters. “There will be discussions [in the government] soon. I will present forecasts to you as soon as those discussions are over.”
“We are going to have less growth than was projected,” said Arsen Ghazarian, the head of Armenia’s largest business association. “Forecasts range from 0.5 percent to 2 percent.”