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IMF Executive Board Concludes First Review under the Stand-By Arrangement for the Republic of Armenia

December 20, 2019

  • Armenia’s economic performance is strong with healthy growth, low inflation, a stable financial system, with increasing foreign reserves and higher revenues.
  • Despite fiscal overperformance, it is key to maintain the reform momentum to strengthen revenue mobilization, including by completing reforms to property taxation.
  • Implementation of the authorities’ reform agenda including efforts to improve governance by establishing a holistic anti-corruption framework, will bolster sustainable and inclusive growth.

On December 20, 2019, the Executive Board of the International Monetary Fund (IMF) completed the first review under of the Republic of Armenia’s performance under the program supported by the Stand-By Arrangement (SBA). The 36-month SBA, with a total access of SDR 180 million (about US$ 248.2 million), equivalent to 139.75 percent of Armenia’s quota in the IMF, was approved by the IMF’s Board on May 17, 2019 (see Press Release No. 19/173).

The Armenian authorities continue to view the SBA as precautionary until the program expires in May 16, 2022, an insurance policy against unforeseen economic shocks that could lead to a balance of payments need.

Following the Executive Board’s discussion today, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair issued the following statement:

“Armenia’s economic performance is strong with healthy growth, low inflation, a stable financial system, and improving external and fiscal buffers. Public debt remains on a declining trajectory, with Armenia expected to achieve its medium-term debt objective, several years earlier than expected. This favorable outlook provides an opportunity to accelerate reform efforts in support of more balanced and inclusive growth, declining poverty, and falling unemployment.

“The 2019 fiscal outturn overperformed the budget, reflecting both higher-than-expected revenues and lower-than-expected capital spending. Strengthening the implementation of capital spending, in line with a sound public investment management process, remains a priority. Despite fiscal overperformance, reform momentum should be maintained to improve revenue mobilization, including by completing reforms to property taxation and further strengthening revenue administration. Bolstering the budgetary process would also further safeguard the credibility of the fiscal rule.

“The monetary policy framework’s focus on price stability has served Armenia well. The authorities’ implementation of Basel III measures will raise the resilience of the financial system, while their plans to develop the capital market and improve access to finance are also welcome.

“Implementation of the authorities’ reform agenda will bolster sustainable and inclusive growth. Efforts to improve governance by establishing a holistic anti-corruption framework are ongoing. The authorities also reaffirmed their commitment to protect the most vulnerable by expanding, and better targeting, their social safety net. Enhanced steps to strengthen human capital and increase female labor force participation are key focal points of the authorities’ longer-term structural agenda.”

Table 1. Armenia: Selected Economic and Financial Indicators, 2016–24

2016

2017

2018

2019

2020

2021

2022

2023

2024

Act.

Act.

Act.

Proj.

National income and prices

Real GDP (percent change)

0.2

7.5

5.2

6.5

4.9

4.5

4.5

4.5

4.5

Final consumption expenditure, Contrib. to Growth

-0.9

7.4

2.7

8.3

3.3

1.3

1.7

1.7

1.8

Gross fixed capital formation, Contrib. to Growth

-2.4

1.5

0.8

2.1

2.5

3.0

2.3

1.9

1.5

Changes in inventories, Contrib. to Growth

0.7

1.1

4.0

-3.6

-1.0

0.0

0.0

0.0

0.0

Net exports of goods and services, Contrib. to Growth

3.1

-1.2

-1.8

-0.2

0.1

0.2

0.5

0.9

1.2

Gross domestic product (in billions of drams)

5,067

5,564

6,005

6,541

7,095

7,636

8,283

8,992

9,751

Gross domestic product (in millions of USD)

10,546

11,527

12,433

13,444

14,132

14,839

15,704

16,632

17,596

Gross domestic product per capita (in USD)

3,524

3,869

4,188

4,528

4,759

4,997

5,288

5,599

5,924

CPI (period average; percent change)

-1.4

1.0

2.5

1.6

2.5

3.3

4.0

4.0

4.0

CPI (end of period; percent change)

-1.1

2.7

1.8

1.5

3.3

3.8

4.1

4.0

4.0

GDP deflator (percent change)

0.3

2.1

2.5

2.3

3.4

3.0

3.8

3.9

3.8

Unemployment rate (in percent)

20.4

18.9

18.5

17.6

17.5

17.2

16.9

16.8

16.7

Investment and saving

(in percent of GDP)

Investment

18.0

19.3

22.4

22.9

24.1

25.2

25.3

25.3

25.3

National savings

16.0

16.3

13.0

14.9

16.2

17.7

18.2

18.9

19.3

Money and credit (end of period)

(percent change)

Reserve money

13.1

-1.0

17.8

9.0

8.8

8.0

8.3

8.5

8.7

Broad money

17.5

18.5

7.4

9.1

8.8

8.0

8.3

8.5

8.7

Private sector credit growth

6.0

16.5

17.2

16.0

11.5

11.0

10.5

9.0

8.5

Central government operations

(in percent of GDP; unless otherwise indicated)

Revenue and grants

21.4

21.2

22.3

23.5

23.9

23.8

24.0

24.2

24.3

Of which : tax revenue

20.1

20.2

20.7

21.8

22.3

22.5

22.7

22.9

23.1

Expenditure

27.0

26.0

24.1

25.0

26.2

25.7

25.9

26.1

26.2

Overall balance on a cash basis

-5.6

-4.8

-1.8

-1.5

-2.3

-1.9

-1.9

-1.9

-1.9

Public and publicly-guaranteed (PPG) debt

56.7

58.9

55.8

53.6

53.5

52.6

51.6

50.7

50.0

Central Government's PPG debt (in percent)

52.0

53.7

51.3

50.0

50.6

50.4

49.9

49.5

49.1

Share of foreign currency debt (in percent)

80.9

81.1

72.2

72.1

71.1

69.9

68.4

68.6

68.6

External sector

(in millions of USD; unless otherwise indicated)

Exports of goods and services

3,501

4,312

4,700

4,963

5,182

5,484

5,828

6,235

6,636

Imports of goods and services

-4,517

-5,723

-6,647

-6,887

-7,151

-7,505

-7,911

-8,343

-8,841

Exports of goods and services (percent change)

11.6

23.2

9.0

5.6

4.4

5.8

6.3

7.0

6.4

Imports of goods and services (percent change)

2.2

26.7

16.1

3.6

3.8

5.0

5.4

5.5

6.0

Current account balance (in percent of GDP)

-2.1

-3.0

-9.4

-8.0

-7.9

-7.5

-7.1

-6.4

-6.0

FDI (net)

263

222

247

296

318

341

369

399

440

Gross international reserves

2,204

2,314

2,259

2,357

2,363

2,405

2,457

2,646

2,669

Import cover 1/

4.6

4.2

3.9

4.0

3.8

3.6

3.5

3.6

3.4

End-of-period exchange rate (dram per USD)

484

484

484

Average exchange rate (dram per USD)

480

483

483

Sources: Armenian authorities, and IMF staff estimates and projections.

1/ Gross international reserves in months of next year's imports of goods and services, including the SDR holdings.

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