Press Release No. 25/222

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the fifth review under the Stand-By Arrangement (SBA) with Armenia. The completion of the review enables access to an amount equivalent to SDR 18.4 million (about US$26.1 million), bringing total access to the equivalent of SDR 110.4 million (about US$156.9 million). The SBA was approved by the IMF Executive Board on December 12, 2022 (see Press Release No. 22/429). The Armenian authorities continue to treat the arrangement as precautionary. The Executive Board’s decision was taken on a lapse-of-time basis.[1]

Armenia’s economic activity remains strong. Real GDP growth reached 5.9 percent in 2024 and is expected to return to its long-term trend of 4.5 percent in 2025 as trade and services normalize. Inflation is expected to remain around the Central Bank of Armenia’s (CBA) target by end-2025. Risks to this outlook are elevated, stemming from the unprecedented uncertainty related to the ongoing global trade tensions and potential slowdown in the growth of trading partners. Regional geopolitical shifts, which could lead to a reversal of recent capital inflows and foreign exchange (FX) volatility, also weigh on the outlook.

The slowdown in external demand, lower remittances inflows, and robust domestic demand, are projected to widen the current account deficit to 4.5 percent of GDP in 2025. Nonetheless, external and financial sector buffers remain strong.

The 2025 budget deficit target of 5.5 percent of GDP is appropriate, accommodating priority spending needs, including on national security, refugee integration, and infrastructure development. The adopted 2026-28 medium-term expenditure framework will reduce the fiscal deficit in 2026 to 4.5 percent, supporting macro-fiscal stability while making room for well-targeted, priority social and development spending.

The program is broadly on track. All end-December 2024 quantitative performance criteria (QPCs) have been met except for a small breach of the QPC on budget domestic lending. The end-December 2024 inflation was within the inner Monetary Policy Consultation Clause bands. Progress on structural benchmarks continues, although with some delays.

The ongoing economic uncertainty underscores the need for prudent policies and steadfast implementation of structural reforms:

• Fiscal policy should continue to balance the need to support national spending priorities while maintaining macro-fiscal stability, with further efforts to mobilize revenue and enhance spending efficiency.
• The CBA should remain proactive in keeping inflation anchored, with future interest rate decisions guided by developments in inflation and inflation expectations. The flexible exchange rate should continue to serve as a key shock absorber. Foreign exchange interventions should be limited to addressing disorderly market conditions and seeking opportunities to bolster FX reserves through purchases when conditions allow.
• To sustain long-term growth, structural reforms should continue to advance reforms focused on improving labor market flexibility, diversifying exports, enhancing supervisory frameworks, and strengthening governance.

 

 

Table 1. Armenia: Selected Economic and Financial Indicators, 2022–30

					2022	2023	2024		2025	2026	2027	2028	2029	2030
					Act.				Proj.
National income and prices:
Real GDP (percent change)					12.6	8.3	5.9		4.5	4.5	4.5	4.5	4.5	4.5
Final consumption expenditure, Contrib. to Growth					3.7	5.3	3.3		3.8	2.5	2.9	2.9	2.9	2.9
Gross fixed capital formation, Contrib. to Growth					2.7	3.1	2.6		2.6	2.5	2.1	2.1	2.1	2.1
Changes in inventories, Contrib. to Growth					-0.3	0.0	-0.3		-1.8	0.0	0.0	0.0	0.0	0.0
Net exports of goods and services, Contrib. to Growth					6.2	-0.1	0.0		0.3	-0.5	-0.5	-0.5	-0.5	-0.5
Gross domestic product (in billions of drams)					8,501	9,493	10,193		10,926	11,760	12,658	13,624	14,665	15,784
Gross domestic product (in millions of U.S. dollars)					19,514	24,186	25,705		26,437	26,864	28,084	29,724	31,603	33,547
Gross domestic product per capita (in U.S. dollars)					6,661	8,159	8,671		8,917	9,060	9,471	10,024	10,656	11,311
CPI (period average; percent change)					8.7	2.0	0.3		3.2	3.0	3.0	3.0	3.0	3.0
CPI (end of period; percent change)					8.3	-0.6	1.5		3.3	3.0	3.0	3.0	3.0	3.0
GDP deflator (percent change)					8.0	3.1	1.4		2.6	3.0	3.0	3.0	3.0	3.0
Unemployment rate (in percent)					13.5	12.4	13.9		13.5	14.0	14.0	14.0	14.0	14.0
Investment and saving (in percent of GDP)
Investment					22.4	22.9	23.8		21.2	21.2	21.2	21.1	21.1	21.1
National savings					22.7	20.6	20.0		16.7	16.4	16.5	16.4	16.3	16.3
Money and credit (end of period)
Reserve money (percent change)					5.0	-4.0	13.8		9.8	9.8	9.8	9.8	9.8	9.8
Broad money (percent change)					16.1	17.4	13.7		12.5	12.5	12.5	12.5	12.5	12.5
Private sector credit growth (percent change)					4.5	18.4	31.7		13.3	13.3	13.3	13.3	13.3	13.3
Central government operations (in percent of GDP)
Revenue and grants					24.3	24.9	25.3		25.1	25.4	25.5	25.5	25.5	25.5
Of which: tax revenue					21.9	22.5	22.4		23.0	23.3	23.4	23.4	23.4	23.4
Expenditure					26.4	26.9	29.0		30.6	29.9	29.8	29.3	29.0	28.8
Overall balance on a cash basis					-2.1	-2.0	-3.7		-5.5	-4.5	-4.3	-3.8	-3.5	-3.3
Public and publicly-guaranteed (PPG) debt (in percent of GDP)					49.2	50.5	50.0		54.2	55.9	57.4	57.6	57.4	57.1
Central Government's PPG debt (in percent of GDP)					46.7	48.2	48.0		52.4	54.3	56.0	56.4	56.4	56.1
Share of foreign currency Central Government PPG debt (in percent)					62.1	52.7	48.2		47.7	46.9	46.3	46.3	46.5	46.9
External sector
Exports of goods and services (in millions of U.S. dollars)					10,118	14,338	18,618		12,167	12,292	12,537	12,863	13,228	13,611
Exports of goods and services (percent change)					100.8	41.7	29.8		-34.7	1.0	2.0	2.6	2.8	2.9
Imports of goods and services (percent change)					66.8	41.6	31.3		-30.7	1.2	2.4	2.9	2.9	3.1
Current account balance (in percent of GDP)					0.3	-2.3	-3.9		-4.5	-4.8	-4.8	-4.8	-4.8	-4.8
FDI (net, in millions of U.S. dollars)					926	527	76		397	454	468	483	529	534
Gross international reserves (in millions of U.S. dollars)					4,112	3,610	3,679		3,427	3,561	3,665	3,768	3,869	3,969
Import cover 1/					3.4	2.3	3.3		3.1	3.1	3.1	3.1	3.1	3.1
End-of-period exchange rate (dram per U.S. dollar)					394	405	397		…	…	…	…	…	…
Average exchange rate (dram per U.S. dollar)					436	392	397		…	…	…	…	…	…
Sources: Armenian authorities; and Fund staff estimates and projections.
1/ Gross international reserves in months of next year's imports of goods and services, including the SDR holdings.

 

[1] The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.