According to the prediction of the Armenian Central Bank, the Armenian economy will fall by 5.8% during the current year. This prediction was made in a recent report entitled “RA monetary policy: second quarter” published by the CB recently.
It is worth mentioning that this economic slump predicted by the CB is bigger than that predicted by the International Monetary Fund last week (5%). Day by day the CB is predicting higher economic fall and it is not excluded that some time later it may forecast a higher rate of economic recession for 2009. In the monetary policy of the first quarter of 2009 the CB predicted economic growth, however in March they announced that the economic fall would reach 3%. On March 11 the prime minister met with representatives of coalition parties in the parliament and said that the government’s worst scenario would predict a 4,5% economic fall. “Yes, we foresee a 4,5 per cent growth in Armenia, zero growth, 1-2 per cent slump, or 4,5 per cent slump. We have taken all these scenarios into consideration,” said the prime minister. It turns out that even the worst scenario of the government did not come true. In the last report the CB writes that it may be possible to keep this predicted 5.8% fall only in case if the government successfully implements its anti-crisis program. By referring to the government’s anti-crisis policy the CB means encouraging small and medium enterprises, supporting export sector, as well as increase of state expenses in construction and infrastructures. As for the separate sectors of the economy, according to the CB the deepest slump will be in construction sector (15-19% real fall), production (4.5-7% real fall), and it forecasts that there will be some small development in the sectors of services and agriculture. The situation is not good in foreign trade and export either. It is expected that the real fall in the sector of export of goods and services will cover 5-8% in 2009. The reason is the fact that the prices of export goods have fallen (copper, diamond, etc). As for the import, the import capacity will be cut down by 25-30% in 2009. In other countries during crisis the prices of products either fall or are increased a little in order to resist the crisis. However Armenia’s population does not enjoy this positive side of the crisis yet. Even more, the CB expects increase of inflation starting from the second quarter of 2009. “As a result, at the end of the second quarter the inflation rate will be on the top of the 4+-1.5% target rate, and as a result of the mentioned factors it will be in the middle or a little higher of the predicted mid rate. The CB’s prediction on inflation during the second quarter of 2009 is about 4,5%, and in the end of the year – 4,9%,” writes the CB’s monetary policy for the second quarter of 2009.