Significance
Multilateral financial institutions have slashed their growth forecasts for 2015, with several expecting Armenia to head into recession this year. With Armenia's main economic partner, Russia, in recession, trade, investment and remittance flows to Armenia are expected to suffer, providing few reasons for economic optimism in the months ahead. However, the government is holding to its over-optimistic forecast of 4.1% growth.
Impacts
The extension of Western sanctions against Russia later this year would harm Armenia's prospects for an economic recovery in 2015-16.
The risk of anti-government protests will rise if the economic slowdown is steeper than expected.
Non-performing loans will rise as lower remittance flows and higher inflation erode household income.