Open news feed Close news feed
A A

IMF call for decisive implementation of policy actions and reforms

Featured news Economy
603d4bae1f99bcca832ab05f658794a7

Economic growth in Armenia will near zero in 2015, the International Monetary Fund (IMF) said in its latest World Economic Outlook (WEO). The report says Armenia is facing a number of problems resulted by the worsening economic situation in Russia. “Performance under the program has faced challenges, as spillovers from Russia are taking a toll. Growth has been lower than envisaged at the outset of the program–in line with lower growth in Russia—and the dram has depreciated in a context of lower remittances and exports and weaker regional currencies. The external current account deficit and dollarization continue to be high, keeping the economy vulnerable to shocks. Poverty and unemployment also remain high. The main risks stem from a further deterioration in Russia and protracted slow growth in Europe. Weaker growth prospects and greater vulnerability call for decisive implementation of policy actions and reforms,” says the IMF. The report also speaks about the role of the IMF and the programmes and assistance it has provided to Armenia. Speaking about the challenges the country is facing, the IMF says “Key challenges are to manage implementing appropriate policy responses to the external shock stemming from the sharp deterioration in Russia, while stepping up fiscal and structural reforms. There is a need to balance the needed fiscal stimulus to support growth in 2015-16, with fiscal consolidation in 2016-17. Revenue reforms are moving forward, but raising revenues is challenging. Efforts in the area of revenue administration should start in 2015 and be complemented in 2016–17 with tax policy measures. The banking sector remains well-capitalized, but also heavily dollarized. Profitability has declined due to weaker economic activity and the depreciation of the dram. The Central Bank of Armenia monitors developments closely, and it has been working with banks to ensure an increase in minimum capital requirements in order to achieve higher buffers and foster economies of scale. While Armenia adequate levels of international reserves, balance of payments pressures remain given the difficult external context. Continued fiscal discipline, together with exchange rate flexibility and structural reforms, will be needed to mitigate pressures, along with continued support from external partners. Armenia’s economic growth is highly dependent on Russia, which in turn is influenced by Europe, global oil prices, and geopolitical developments. With membership in the Eurasian European Union starting in January 2015, clarity and ambition on the structural reform agenda are now even more important than before. Protecting the poor during the program period will continue to be critical. To this end, the authorities have committed to improving the efficiency and widening the coverage of social spending. Armenia is capable of weathering these challenges. The policy package being implemented by the authorities, combined with financial support from the IMF and other partners, should enable Armenia to weather the external shock, foster medium-term growth prospect with rising incomes and employment, and help reduce poverty.” The full report is available here