Although the ruling party's victory in the elections ensures policy continuity in Armenia, uncertainty remains regarding the normalization of relations with Azerbaijan and integration with the European Union, ING Bank's assessment of the Armenian economy said, APA-Economics reports.
The bank notes that although the ruling party retained its majority in parliament, it failed to secure the supermajority required for constitutional amendments. According to ING's assessment, this factor could complicate constitutional changes that may be required to ease tensions with Azerbaijan or advance integration with the EU.
The report emphasizes that despite the strengthening of the Armenian dram amid inflows of portfolio investments and rising remittances, unresolved disagreements with Azerbaijan remain a risk factor for the national currency.
At the same time, the bank believes that a slowdown in Armenia's integration process with the EU also reduces the risk of economic countermeasures from Russia. It notes that Russia accounts for at least 80% of Armenia's gas imports, one-third of its foreign trade and two-thirds of remittances.
ING states that it is still unclear whether the political agenda surrounding the future development of Armenia-EU-Russia relations will produce concrete outcomes for the markets.
According to the bank's forecast, amid foreign policy uncertainty, the strong position of the Armenian dram and annual inflation remaining within the 4–5% range, the Central Bank of Armenia will keep its key interest rate unchanged at 6.5% next week.
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