IMF Executive Board Concludes 2021 Article IV Consultation and Completes the Fourth and Fifth Reviews under the Stand-By Arrangement for the Republic of Armenia
IMF News, December 17, 2021
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- Published: December 17, 2021
Executive Board decision and IMF financing
- The Executive Board concluded the 2021 Article IV consultation and completed the fourth and fifth reviews of Armenia’s program supported by the Stand-By Arrangement (SBA).
- Completion of these reviews allows the authorities to draw SDR 51.43 million (about US$ 72 million).
- Total disbursements following this draw will be SDR 283.09 million (about US$ 396 million).
- Armenia’s three-year SBA is SDR 308.8 million (about US$ 432 million), equivalent to 239.75 percent of Armenia’s quota; it was approved on May 17, 2019 and augmented on May 18, 2020.
- The Executive Board granted a waiver of nonobservance for the end-June 2021 quantitative performance criterion on net international reserves based on corrective actions taken by the authorities.
Recent economic performance and outlook
- Real GDP contracted by 7.4 percent in 2020.
- GDP growth is projected at:
- around 5½ percent in 2021,
- 5.3 percent in 2022 (Table shows 5.3 percent under "Proj."),
- medium-term growth projected around 4½ - 5 percent, contingent on COVID-19 developments, external demand, and progress on structural reforms implementation.
- The economy has rebounded in 2021 following timely and targeted health, fiscal, and financial support measures.
- Inflation developments:
- CPI (period average; percent change): 6.6 in 2020; 5.1 in 2021; 4.5 in 2022; 4.2 in 2023; 4.1 in 2024.
- CPI (end of period; percent change): 8.5 in 2020; 4.0 in 2021.
- GDP deflator (percent change): 7.8 in 2021; 6.3 in 2022; 3.6 in 2023.
- Unemployment rate (in percent): 18.1 in 2020; 18.5 in 2021; projected 17.8 in 2022; 17.5 in 2023; 17.3 in 2024; 17.0 in 2025.
Near-term policy priorities and recommended reforms
- Near-term priorities highlighted:
- Continued acceleration of vaccinations.
- Implementation of key reforms under the government’s 2021-26 program to sustainably raise inclusive growth by rebalancing the economy while preserving economic and financial stability.
- Policy recommendations from Mr. Bo Li, Deputy Managing Director and Acting Chair:
- Strike an appropriate balance between withdrawal of targeted policy support and rebuilding medium-term buffers until the recovery is firmly entrenched.
- Develop an action plan to support robust and timely reform implementation with its costing well integrated into the medium-term expenditure framework.
- Commit to medium-term debt sustainability and rebuild medium-term fiscal buffers anchored on a credible medium-term fiscal framework and growth-friendly fiscal consolidation.
- Prioritize quality public investment while improving its execution.
- Continue careful monetary monitoring and stand ready to adjust stance to ensure inflation returns to its target; maintain exchange rate flexibility as an important policy buffer.
- Advance financial sector reforms to ensure the sector can support the recovery and longer-term growth, including macroprudential measures and enhancements to the CBA’s risk-based supervision framework.
- Implement the enhanced action plan for capital market development to expand the market’s role in financing domestic investment.
Fiscal stance and public debt
- Central government operations (in percent of GDP):
- Revenue and grants: 25.2 in 2020; 23.6 in 2021; 24.7 in 2022; 25.0 in 2023; 25.3 in 2024; 25.6 in 2025; tax revenue shown as 22.0 in 2020; 21.8 in 2021; 22.6 in 2022; 22.7 in 2023; 22.9 in 2024; 23.1 in 2025; 23.4 in 2026.
- Expenditure: 30.6 in 2020; 28.2 in 2021; 27.8 in 2022; 26.7 in 2023; 26.6 in 2024; 26.8 in 2025.
- Overall balance on a cash basis: -4.7 in 2020; -3.1 in 2021; -1.5 in 2022; -1.3 in 2023; -1.2 in 2024.
- Public and publicly guaranteed (PPG) debt (in percent of GDP): 67.4 in 2020; 64.6 in 2021; 63.6 in 2022; 61.2 in 2023; 58.9 in 2024; 56.5 in 2025; 54.4 in 2026.
- Central Government's PPG debt (in percent): 63.5 in 2020; 61.5 in 2021; 61.6 in 2022; 59.6 in 2023; 57.7 in 2024; 53.8 in 2025.
- Share of foreign currency debt (in percent): 76.0 in 2020; 72.6 in 2021; 70.6 in 2022; 70.3 in 2023; 68.5 in 2024; 67.7 in 2025; 67.6 in 2026.
Monetary and financial sector developments
- Monetary policy was tightened against rising inflation; the tightening and improved policy communications have helped anchor inflation expectations.
- Money and credit (end of period, percent change):
- Reserve money: 7.3 in 2020; 7.7 in 2021.
- Broad money: 9.0 in 2020; 16.3 in 2021; 9.8 in 2022; 14.3 in 2023; 9.7 in 2024; 8.1 in 2025; 8.0 in 2026.
- Private sector credit growth: 7.0 in 2019 (Table shows 17.2 in 2018; 7.0 in 2019; no 2020 number listed).
- Financial sector recommendations:
- Continue macroprudential measures to strengthen the supervisory toolkit.
- Enhance the CBA’s risk-based supervision framework.
- Strengthen capital market development to expand market financing for domestic investment.
External sector and external buffers
- Exports of goods and services (in millions of USD): 3,763 in 2020; 4,559 in 2021; 5,295 in 2022; 5,816 in 2023; 6,381 in 2024; 6,807 in 2025; 7,262 in 2026.
- Imports of goods and services (in millions of USD): -5,019 in 2020; -5,730 in 2021; -6,672 in 2022; -7,459 in 2023; -8,197 in 2024; -8,735 in 2025; -9,303 in 2026.
- Exports percent change: -34.2 in 2020; 21.2 in 2021; 16.1 in 2022; 6.7 in 2023.
- Imports percent change: -33.2 in 2020; 14.2 in 2021; 16.4 in 2022; 11.8 in 2023; 9.9 in 2024; 6.5 in 2025.
- Current account balance (in percent of GDP): -2.1 in 2020; -3.5 in 2021; -4.8 in 2022; -5.6 in 2023; -5.7 in 2024.
- FDI (net, in millions of U.S. dollars): 74 in 2020; 223 in 2021; 259 in 2022; 337 in 2023; 421 in 2024; 467 in 2025; 481 in 2026.
- Gross international reserves (in millions of U.S. dollars): 2,616 in 2020; 3,101 in 2021; 3,207 in 2022; 3,320 in 2023; 3,377 in 2024; 3,394 in 2025; 3,402 in 2026.
- Import cover (months of next year's imports): 4.9 in 2020; 4.6 in 2021 (Table shows earlier years: 6.8 in 2018; 5.6 in 2019).
- End-of-period exchange rate (dram per U.S. dollar): 523 in 2020; earlier years 484 in 2018; 480 in 2019. Average exchange rate (dram per U.S. dollar): 483 in 2018; 489 in 2019.
Key socio-economic and national income indicators (selected)
- Gross domestic product (in millions of U.S. dollars): 12,641 in 2020; 13,888 in 2021; 15,729 in 2022; 16,671 in 2023; 17,823 in 2024; 19,217 in 2025; 20,732 in 2026.
- Gross domestic product per capita (in U.S. dollars): 4,267 in 2020; 4,688 in 2021; 5,309 in 2022; 5,627 in 2023; 6,015 in 2024; 6,485 in 2025; 6,995 in 2026.
- Contributions to growth (selected):
- Final consumption expenditure, Contrib. to Growth: -9.7 in 2020; 4.4 in 2021; 3.8 in 2022; 2.7 in 2023; 2.3 in 2024; 2.2 in 2025.
- Gross fixed capital formation, Contrib. to Growth: -1.4 in 2020; 1.3 in 2021; 1.4 in 2022; 1.9 in 2023; 2.1 in 2024; 2.5 in 2025; 2.6 in 2026.
- Net exports of goods and services, Contrib. to Growth: 3.4 in 2020; 0.5 in 2021; -0.5 in 2022; -0.7 in 2023; -0.1 in 2024.
IMF Executive Board press release, December 17, 2021.
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- Press Release-English