European Bank for Reconstruction and Development (EBRD) forecasts 2% economic growth for Armenia in 2016 and 2017.

This forecast is stated in the EBRD’s “Growth Slowly Picking up despite Continuing Global Turmoil” report published yesterday.

“Armenia’s economy made a good start in 2016 but growth slowed in the second quarter; GDP growth decelerated from 4.5% year-on-year in the first quarter to 1.5% year-on-year in the second quarter of the year. In the first half of 2016, growth in exports and government consumption was offset, in part, by contraction in gross fixed capital formation and household consumption,” the report reads.

According to EBRD analysts, deflation in the first eight months of 2016 reflected Armenia’s weak domestic demand and low import prices. Armenia’s economy remained exposed to spill-overs from the recession in Russia. In the first half of 2016, net FDI inflow was low and remittances declined, but at a lower rate than previously.

EBRD estimated Armenian dram stable in the first nine months of the year.

The report also touched upon the policy and general banking system of the Central Bank of Armenia.

“In response to slowing growth, negative inflation and a stabilizing exchange rate, the Central Bank of Armenia gradually lowered refinancing rate from 10.50 % to 6.75% in one year. In the first seven months of 2016, commercial bank lending remained mostly flat in the context of weak domestic demand and continued consolidation in the banking sector,” the report states.

At the same time, the authors of the report branded the NK conflict “a risk to Armenia’s growth outlook”.

It is worth mentioning that Armenia established 2.2% economic growth in the 2016 state budget, and 3.2% growth in the 2017 draft state budget.