ArmInfo. The IMF Executive Board completed the forth review under the Stand-By Arrangement (SBA) with Armenia, providing the country with access to SDR 18.4 million (about US $24.12 million).
This was noted in the IMF statement, which stated that the completions of the review will bring total access to SDR 92 million (about US $120.59 million). The IMF forecasts that supported by strong domestic demand, real GDP growth in Armenia is projected to reach about 6 percent in 2024 (versus 8.3% in 2023 - ed.) and moderate to about 5 percent in 2025. Over the medium term growth, according to IMF forecasts, Armenia's GDP growth will decelerate to around 4.5%, although an acceleration of structural reforms could raise growth potential. Inflation is projected to remain below the CBA target in the short term and rise gradually toward its target over the medium term.
"The program is broadly on track. All quantitative performance criteria and indicative targets for end-June 2024 were met, although lower-than-expected inflation breached the lower-inner Monetary Policy Consultation Clause band (4%, +/- 1.5 - ed.). The authorities have adopted a 2025 budget with an overall fiscal deficit of 5.5% of GDP, in line with the program, to accomodate urgent spending needs and intend to resume fiscal consolidation in 2026," the IMF said in a statement.
Following the executive Boards' discussion today, Mr. Bo Li, Deputy Managing Director and Acting Chair made this statement: "Armenia's economic outlook is positive, with robust growth and low inflation. The program performance is strong, but sustained prudent policies and reform efforts remain critical to preserve buffers and build resilience in a still uncertain domestic and external environment. The 2025 budget appropriately balances preserving macroeconomic stability and addressing priority spending related to the integration of refugees and high security spending needs. Over the medium term, gradual fiscal consolidation will be critical to maintain financial stability. Planned measures include strengthening revenue mobilization, expenditure prioritization, and adoption of a medium-term expenditure framework. Progress on public financial management reforms is essential to reduce fiscal risks, especially those related to state-owned enterprises, public-private partnerships, and government guarantees."
According to IMF, external reserves and financial sector buffers remain high. According to Mr. Bo Li, the monetary policy stance is appropriate, and further policy rate decisions should continue to be guided by the outlook for inflation and inflation expectations given the uncertain outlook. " The CBA's growing credibility since the adoption of inflation targeting in 2006, strengthened operational independence, and upgrades to its monetary policy framework provides scope for lowering the inflation target within a well- coordinated and communicated strategy. The flexible exchange rate has served Armenia well to in absorbing external shocks, while building reserve buffers."
According to Mr. Bo Li, the banking system of Armenia remains sound. The authorities continues to carefully monitor financial sector risks, particularly originating from the real estate market, and recalibrate prudential tools if necessary. He believes that efforts should focus on preserving capital buffers, enhancing supervisory powers and capacities, and strengthening anti-crisis management, including through adoption of the new bank resolution law.. "Advancing structural reforms would support sustainable and inclusive growth. Continued efforts to boost labor market participation, especially among youth, women and vulnerable groups. Reforms to diversify exports, improve the business environment, strengthen governance and advance climate policy are critical to enhance economic resilience and increase potential growth," Mr. Bo Li concluded.
