IMF Executive Board Concludes 2019 Article IV Consultation with the Republic of Armenia
IMF News, May 31, 2019
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- Published: May 31, 2019
Economic performance (recent)
- Activity expanded by 5.2 percent in 2018, aided by a pickup in private investment and continued recovery in remittances.
- Annual consumer price index (CPI) inflation fell to 1.9 percent in March.
- The current account deficit widened to 9.1 percent of GDP in 2018, primarily owing to stronger capital goods imports, weaker primary income, and some measurement issues.
- Fiscal consolidation is on track, supported by strong tax administration efforts, with public debt as a share of GDP declining in 2018.
- Monetary and financial conditions remain stable with limited pressure on the exchange rate.
- The banking sector is well-capitalized, and credit growth has been supporting economic activity.
- Structural policy developments noted:
- Fiscal rule redesigned and improved in December 2017.
- Full‑fledged pension reform came into effect in July 2018.
- A draft public‑private partnership law has been prepared in consultation with international development partners, including the IMF.
- The new government pledged to speed up reform, in particular to decisively combat corruption and improve governance, to promote inclusive and sustainable growth.
Outlook and risks
- Growth projections:
- Growth is expected to moderate to 4.6 percent in 2019 and stabilize at 4.5 percent over the medium term.
- The authorities are aiming for higher medium-term growth supported by reform.
- Inflation:
- CPI inflation is projected to converge to the Central Bank of Armenia’s (CBA’s) medium-term target of 4 percent over the next two years.
- External balances:
- The current account deficit is expected to improve to 7.3 percent of GDP in 2019, and gradually fall to around 6 percent of GDP as exports continue to grow and imports moderate somewhat.
- Risks:
- Downside risks are mostly external: increased global trade tensions and turbulence in global financial markets, which could lower trading partners’ growth, remittances, and commodity prices.
- Upside: faster progress on the reform agenda could boost potential growth.
Executive Board assessment and policy guidance
- Directors agreed with the thrust of the staff appraisal and commended authorities’ efforts to maintain macroeconomic stability and strengthen policy frameworks.
- Key messages:
- Armenia remains vulnerable to external shocks and faces structural challenges in transitioning toward a dynamic, private‑sector led emerging market economy.
- Directors welcomed the new government’s reform agenda, particularly anti‑corruption efforts to improve governance and the business environment, to foster sustainable and inclusive growth.
- Ownership and resolute implementation are key to the success of the reforms.
- Fiscal policy:
- Directors supported fiscal consolidation plans guided by the fiscal rule, aiming to bring central government debt to below 50 percent of GDP in the medium term while leaving adequate fiscal space for critical spending.
- They noted the authorities’ tax reform, including simplification of the personal income tax system, aims to improve compliance and support economic activity, but cautioned that careful monitoring is needed to avoid a fall in revenues and worsening of income distribution.
- Emphasized need for accompanying sustainable compensating measures and strong tax administration efforts.
- Strengthening revenue mobilization and improving public investment management were encouraged.
- Monetary and exchange rate policy:
- The current monetary policy stance remains appropriate; policy should remain focused on bringing inflation back to its medium‑term target.
- Importance of continued exchange rate flexibility, maintaining foreign exchange reserves at an adequate level, and protecting competitiveness.
- Foreign exchange market interventions should be limited to preventing disorderly market fluctuations.
- Financial sector and macroprudential policies:
- Encouraged strengthening monetary and financial sector policy frameworks.
- To improve monetary transmission and inflation targeting, need to develop a well‑functioning interbank market, enhance communication, and promote de‑dollarization.
- Welcomed authorities’ commitment to bolstering banks’ foreign exchange liquidity buffers; encouraged measures to develop capital markets further and increase access to finance.
- Structural reforms:
- Advance reforms to foster sustainable and inclusive growth: promote private sector development, attract more FDI, and increase diversification.
- Welcomed government’s five‑year program to strengthen governance, enhance competition, and improve the business climate.
- Encouraged measures to enhance human capital and foster female labor market participation.
Key statistics and projections (selected from Table 1: Armenia: Selected Economic and Financial Indicators, 2016–23)
- Real GDP (percent change):
- 2016: 0.2
- 2017: 7.5
- 2018: 5.2
- 2019: 4.6 (projection)
- 2020: 4.5 (projection)
- GDP (in billions of drams):
- 2016: 5,067
- 2017: 5,569
- 2018: 6,003
- 2019: 6,549
- 2020: 7,102
- 2021: 7,745
- 2022: 8,437
- 2023: 9,169
- Gross domestic product per capita (in U.S. dollars):
- 2016: 3,524
- 2017: 3,872
- 2018: 4,186
- 2019: 4,533
- 2020: 4,764
- 2021: 5,068
- 2022: 5,386
- 2023: 5,710
- CPI (period average; percent change):
- 2016: -1.4
- 2017: 1.0
- 2018: 2.5
- 2019: 3.0 (projection)
- 2020: 3.7 (projection)
- 2021: 4.1 (projection)
- Unemployment rate (in percent):
- 2016: 20.2
- 2017: 18.6
- 2018: 18.1
- 2019: 17.9 (projection)
- 2020: 17.7 (projection)
- 2021: 17.8 (projection)
- 2022: 17.6 (projection)
- Investment and saving (in percent of GDP):
- Investment:
- 2016: 18.0
- 2017: 19.0
- 2018: 22.4
- 2019: 23.6
- 2020: 24.1
- 2021: 24.4
- 2022: 24.9
- 2023: 25.6
- National savings:
- 2016: 15.8
- 2017: 16.6
- 2018: 13.3
- 2019: 16.3
- 2020: 16.8
- 2021: 17.5
- 2022: 18.4
- 2023: 19.4
- Money and credit (end of period):
- Reserve money (percent change):
- 2016: 13.1
- 2017: -1.0
- 2018: 9.0
- 2019: 9.5 (projection)
- 2020: 8.5 (projection)
- Broad money (percent change):
- 2016: 18.5
- 2017: 7.0
- Private sector credit growth (percent change):
- 2016: 6.0
- 2017: 16.5
- 2018: 17.2
- 2019: 16.0 (projection)
- 2020: 15.5 (projection)
- 2021: 13.0 (projection)
- 2022: 12.5 (projection)
- 2023: 11.0 (projection)
- Central government operations (in percent of GDP):
- Revenue and grants:
- 2016: 21.4
- 2017: 21.2
- 2018: 21.7
- 2019: 22.6 (projection)
- 2020: 22.8 (projection)
- 2021: 22.9 (projection)
- 2022: 23.2 (projection)
- Of which : tax revenue:
- 2016: 20.1
- 2017: 20.6
- 2018: 21.0
- 2019: 21.3 (projection)
- 2020: 21.5 (projection)
- 2021: 21.9 (projection)
- Expenditure:
- 2016: 27.0
- 2017: 26.0
- 2018: 23.5
- 2019: 25.2 (projection)
- 2020: 24.7 (projection)
- 2021: 25.0 (projection)
- Overall balance on a cash basis:
- 2016: -5.6
- 2017: -4.8
- 2018: -2.5
- 2019: -2.1 (projection)
- 2020: -1.9 (projection)
- Public and publicly-guaranteed (PPG) debt (percent of GDP):
- 2016: 56.7
- 2017: 58.9
- 2018: 55.8
- 2019: 54.6 (projection)
- 2020: 53.7 (projection)
- 2021: 52.3 (projection)
- 2022: 51.1 (projection)
- 2023: 50.1 (projection)
- Central Government's PPG debt (in percent):
- 2016: 52.0
- 2017: 51.4
- 2018: 51.0
- 2019: 50.8 (projection)
- 2020: 50.2 (projection)
- 2021: 49.5 (projection)
- 2022: 49.0 (projection)
- Share of foreign currency debt (in percent):
- 2016: 80.9
- 2017: 81.1
- 2018: 77.5
- 2019: 77.6 (projection)
- 2020: 76.5 (projection)
- 2021: 75.4 (projection)
- 2022: 73.9 (projection)
- 2023: 74.3 (projection)
- External sector:
- Exports of goods and services (in millions of U.S. dollars):
- 2016: 3,500
- 2017: 4,307
- 2018: 4,669
- 2019: 5,074 (projection)
- 2020: 5,361 (projection)
- 2021: 5,744 (projection)
- 2022: 6,137 (projection)
- 2023: 6,625 (projection)
- Imports of goods and services (in millions of U.S. dollars):
- 2016: -4,516
- 2017: -5,710
- 2018: -6,583
- 2019: -7,132 (projection)
- 2020: -7,467 (projection)
- 2021: -7,892 (projection)
- 2022: -8,371 (projection)
- 2023: -8,875 (projection)
- Exports of goods and services (percent change):
- 2016: 11.6
- 2017: 23.0
- 2018: 8.4
- 2019: 8.7 (projection)
- 2020: 5.7 (projection)
- 2021: 7.2 (projection)
- 2022: 7.9 (projection)
- Imports of goods and services (percent change):
- 2016: 26.4
- 2017: 15.3
- 2018: 8.3
- 2019: 4.7 (projection)
- 2020: 6.1 (projection)
- 2021: 6.1 (projection)
- Current account balance (in percent of GDP):
- 2016: -2.3
- 2018: -9.1
- 2019: -7.3 (projection)
- 2020: -6.9 (projection)
- 2021: -6.5 (projection)
- 2022: -6.2 (projection)
- FDI (net, in millions of U.S. dollars):
- 2016: 272
- 2017: 228
- 2018: 266
- 2019: 296 (projection)
- 2020: 318 (projection)
- 2021: 346 (projection)
- 2022: 376 (projection)
- 2023: 407 (projection)
- Gross international reserves (in millions of U.S. dollars):
- 2016: 2,204
- 2017: 2,314
- 2018: 2,249
- 2019: 2,284 (projection)
- 2020: 2,373 (projection)
- 2021: 2,418 (projection)
- 2022: 2,468 (projection)
- 2023: 2,633 (projection)
- End-of-period exchange rate (dram per U.S. dollar):
- 2016: 484
- Average exchange rate (dram per U.S. dollar):
- 2016: 480
- 2017: 483
- 2018: Sources: Armenian authorities; and Fund staff estimates and projections.
IMF Communications Department; Press Release No. 19/190; May 31, 2019.
Content in this bundle
- ԱՄՀ գործադիր խորհուրդն ավարտում է 2019 թ. IV հոդվածի խորհրդակցությունը Հայաստանի Հանրապետության հետ
