The World Bank projected 2.7% growth for Armenian economy in 2017, reflecting the sustained expansion of the tradable sectors and a modest recovery in domestic consumption.

This is evidenced by its latest report.

The organization forecast 1.7% GDP growth for Armenia earlier.  

“Medium term growth is projected to average 3-3.5% a year, given structural weaknesses in the domestic policy framework and remaining uncertainties in external environment,” the report reads.

The government’s planned expenditure restraint and full implementation of the Tax Code are expected to keep the fiscal deficit below 3% of GDP over the medium term.

Policy changes envisaged in the Tax Code would boost revenues by 2 percentage points of GDP by 2021.

“Future poverty reduction will hinge on the recovery of the domestic economy, labor-market dynamics, and remittance inflows. Low growth rates, unfavorable external conditions, and limited fiscal space could slow the pace of poverty reduction; as a result, the poverty rate is
projected to fall from 23.8% in 2017 to 22.2% in 2019,” the World Bank’s report reads.

The analysts emphasize that growth prospects depend on the government’s ability to scale up high quality investment, and speed up structural reform.

Challenges highlighted by World Bank include the past parliamentary election in April of 2017 and upcoming presidential elections in May of 2018.

“Cabinet changes in the wake of each election could adversely affect investor confidence and slow the pace of reform. Domestic political pressures could compound with the negative impact external shocks—including a slower-than expected recovery in Russia,” the World Banks observes.

Upside risks include plans for a new Framework Agreement with the EU and an anticipated increase in trade with Iran following the easing of international sanctions and revisiting bilateral arrangements for trade facilitation.

Word Banks touched upon financial sector, remarking that “the recent mandatory increase in
capital-adequacy ratios is strengthening the financial sector, but the rise of nonperforming loans poses new challenges.”