IMF Executive Board Completes the First Review Under the Stand-By Arrangement with Armenia
IMF News, June 12, 2023
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- Published: June 12, 2023
Review outcome and financing
- The Executive Board completed the first review under the Stand-By Arrangement (SBA) with Armenia.
- The completion enables access of SDR 18.4 million (about US$24.5 million), bringing total access to SDR 36.8 million (about US$49 million).
- The SBA was approved by the IMF’s Board on December 12, 2022.
- The Armenian authorities continue to treat the arrangement as precautionary.
- The Executive Board’s decision on the first review was taken without a meeting.
Recent macroeconomic developments (2022–2023Q1)
- Real GDP growth in 2022: 12.6 percent, driven by robust consumption and external demand, and fueled by large foreign exchange and migrant inflows from Russia.
- Growth momentum continued in 2023Q1, led by expansion in construction, service, and trade-related sectors.
- Current account deficit for the year 2022: 0.9 percent of GDP.
- Gross reserves increased to US$4.1 bn.
- Dram appreciation: over 20 percent against the US dollar in 2022.
Inflation and labor market
- Headline inflation (y-o-y) in April 2023: 3.2 percent.
- Core inflation (y-o-y) in April 2023: 4.3 percent.
- Double-digit nominal wage growth and service price growth are noted as sources of significant underlying inflationary pressures.
- Unemployment rate (2022): 13.0 percent; projected 2023: 13.5 percent, 2024: 14.0 percent.
Fiscal and public debt developments
- Headline fiscal deficit narrowed to 2.1 percent of GDP in 2022 due to robust revenues and spending under-execution.
- Central government debt dropped by 14 percentage points of GDP to 46.7 percent of GDP in 2022.
- Central government operations (selected):
- Revenue and grants (2022): 24.3 percent of GDP; projected 2023: 24.5 percent; 2024: 24.8 percent.
- Of which: tax revenue (2022): 21.9 percent of GDP; projected 2023: 22.7 percent.
- Expenditure (2022): 26.4 percent of GDP; projected 2023: 27.4 percent.
- Overall balance on a cash basis (2022): -2.1 percent of GDP; projected 2023: -2.9 percent; 2024: -2.7 percent.
- Public and publicly-guaranteed (PPG) debt (in percent of GDP): 2022: 49.3; 2023: 49.6; 2024: 50.1.
Program implementation and structural measures
- The program is broadly on track.
- All end-December quantitative performance criteria (QPCs) and indicative targets (IT) were met.
- Good progress toward completion of structural benchmarks (SB).
- The end-March structural benchmark requiring the adoption of a decree clarifying the mandate, reporting, transparency, and viability requirements for the Armenian National Interests Fund (ANIF) was completed as a prior action for the review.
Outlook and risks
- GDP growth projected for 2023: 5.5 percent; 2024: 5.0 percent; 2025: 4.5 percent.
- With services trade and remittances normalizing, the current account deficit is expected to widen in 2023.
- Inflation is expected to stabilize at the Central Bank of Armenia’s target of 4 percent within a year.
- Elevated risks include a challenging external environment, regional tensions, tighter global financial conditions, and a slowdown in major trading partners.
Policy recommendations and priorities
- Fiscal policy:
- If growth and revenues are stronger than projected, building fiscal buffers is a priority.
- Continue revenue mobilization efforts, including broadening the tax base and tackling informality.
- Monetary and financial sector policy:
- Maintain decisive and pro-active, data-dependent monetary policy to remain vigilant against inflationary pressures.
- Closely monitor financial sector risks related to the real estate sector by strengthening supervisory tools.
- Structural reforms to unlock long-term growth potential:
- Boost trade links and diversification.
- Enhance access to finance.
- Complete governance reforms.
- Improve climate change resilience.
Key statistics (selected from Table 1)
- Real GDP (percent change): 2020: -7.2; 2021: 5.7; 2022: 12.6; 2023: 5.5; 2024: 5.0; 2025: 4.5.
- Gross domestic product (in billions of drams): 2020: 6,182; 2021: 6,983; 2022: 8,497; 2023: 9,528; 2024: 10,451; 2025: 11,358.
- Gross domestic product (in millions of U.S. dollars): 2020: 12,642; 2021: 13,861; 2022: 19,503; 2023: 23,873; 2024: 25,121; 2025: 26,251.
- Gross domestic product per capita (in U.S. dollars): 2020: 4,269; 2021: 4,679; 2022: 6,584; 2023: 8,058.
- CPI (period average; percent change): 2020: 1.2; 2021: 7.2; 2022: 8.6; 2023: 5.6.
- CPI (end of period; percent change): 2020: 3.7; 2021: 7.7; 2022: 8.3.
- Investment (in percent of GDP): 2020: 19.7; 2021: 20.7; 2022: 19.4; 2023: 23.2.
- National savings (in percent of GDP): 2020: 15.9; 2021: 17.0; 2022: 18.5; 2023: 21.7.
- Broad money (percent change, end of period): 2020: 9.0; 2021: 13.1; 2022: 16.1; 2023: 11.6.
- Private sector credit growth (percent change, end of period): 2020: 14.3; 2021: -3.9; 2022: 8.0; 2023: 6.8.
- Exports of goods and services (in millions of U.S. dollars): 2020: 3,818; 2021: 5,012; 2022: 9,698; 2023: 11,407.
- Imports of goods and services (in millions of U.S. dollars): 2020: -5,082; 2021: -6,120; 2022: -10,118; 2023: -12,273.
- Current account balance (in percent of GDP): 2020: -3.8; 2021: -3.7; 2022: -1.6; 2023: -3.0.
- FDI (net, in millions of U.S. dollars): 2020: 86; 2021: 342; 2022: 948; 2023: 410.
- Gross international reserves (in millions of U.S. dollars): 2020: 2,616; 2021: 3,230; 2022: 4,103; 2023: 4,248.
- End-of-period exchange rate (dram per U.S. dollar): 2020: 523; 2021: 480; 2022: 394.
IMF Communications Department. Press Release No. 23/205, June 12, 2023.
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