The World Bank reviewed its forecast for Armenian economy’s growth in 2016, lowering it from 2,2% to 1,9%.

This is stated in “Europe and Central Asia: Growth Struggles in the West, Volatility Increases in the East” report recently published by The World Bank.

The World Bank specifies its decision by continued weaknesses in the external conditions and fiscal tightening.

The authors of the report believe that 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% a year. The World Bank predicts that Armenian economy will grow by 2,8% and 2,9% in 2017 and 2018 accordingly.

Furthermore, the authors think that Armenian budget deficit will remain wide in 2016 (at 3.9% of GDP) despite fiscal tightening through a combination of revenue raising measures and moderate expenditure cuts.

As for poverty reduction and income growth, they are likely to stagnate during 2017-2018.

“Even if the agricultural sector continues to perform well and remittance inflows recovers, 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,” noted The World Bank.

According to the authors of the report, the elimination of temporary electricity subsidies, scheduled in August 2016, would negatively affect poor households, whose expenditure of electricity amounts to more than 5% of total consumption.

Meanwhile, analysts of The World Bank believe that Armenia’s economic outlook is subject to considerable downside risks that make a serious policy challenge for sustaining growth.

“Further deterioration of the external environment, including a worsening recession in Russia and the slow recovery of base metal prices, represent significant risks to Armenia’s prospects for economic growth and job creation,” observes the report.

Consider for comparison that Armenian’s 2016 state budget was based on 2,2% forecast of economy growth. The International Monetary Fund (full article in Armenian) predicts 2.25-2.5% for Armenia, while Moody’s suggests 2,2% and Fitch (full article in Armenian) - 2% of economy growth.