IMF Executive Board Concludes the 2023 Article IV Consultation and Completes the Second Review Under the Stand-By Arrangement with Armenia
December 11, 2023
- The Executive Board of the International Monetary Fund (IMF) concluded the 2023 Article IV Consultation and completed the second review under the Stand-By Arrangement (SBA) with Armenia. The Armenian authorities continue to treat the SBA as precautionary.
- Real GDP is projected to grow by 7 percent in 2023 before moderating to 5 percent in 2024. Inflation has subsided rapidly and is projected to revert to the central bank’s target of 4 percent by mid-2024.
- Key policy priorities include preserving macroeconomic stability, building fiscal buffers to support priority infrastructure and social spending, managing fiscal risk, enhancing the monetary policy, macroprudential, and supervisory frameworks, and strengthening economic resilience by advancing structural reforms in the labor and product markets, access to finance, and governance.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the second review under the Stand-By Arrangement with Armenia. This provides the country with access to about US$24.4 million (SDR 18.4 million), bringing the total access to about US$73.3 million (SDR 55.2 million). The Armenian authorities continue to treat the SBA as precautionary.
Armenia’s strong growth momentum continued through 2023. Supported by robust private consumption and investment, the economy is projected to grow by 7 percent in 2023 before moderating to 5 percent in 2024. Over the medium-term, growth is projected to reach its potential of around 4.5 percent, while steadfast implementation of structural reforms under the program could increase potential growth further. Inflation is projected to revert to the central bank’s target of 4 percent by mid-2024 and stabilize around it. The current account is projected to reach 3 percent of GDP in 2023 and 2024 due to robust consumption and investment demand. Foreign direct investment and capital inflows have moderated. Fiscal overperformance has persisted, with the overall fiscal balance remaining in surplus through September 2023, owing to higher than anticipated revenue collection and spending under-execution, notwithstanding the authorities’ prompt fiscal support to address the urgent needs of Nagorno-Karabakh’s refugees.
The Executive Board today also concluded the 2023 Article IV consultation [1] with Armenia. The associated press release will be issued separately.
Following the Executive Board’s discussion today, Mr. Bo Li, Deputy Managing Director and Acting Chair, made the following statement:
“Armenia’s economy has managed to overcome recent external shocks and faces a favorable outlook, with strong growth in the context of moderate inflation. The program performance remains broadly satisfactory. However, an uncertain domestic and external environment warrant continued policy prudence and unwavering reform effort.
“The policy focus of the 2024 budget on preserving macroeconomic stability and providing humanitarian and development support to NK refugees is welcome. In the medium term, a gradual fiscal deficit reduction, anchored on Armenia’s fiscal rules, will ensure that public debt remains moderate. Progress on structural fiscal reforms including tax expenditure rationalization and SOE ownership policy will help contain fiscal risks and mobilize revenues to support priority expenditures on health, social protection, and capital projects.
“The monetary policy stance is appropriate and has helped ease inflation. The CBA should remain proactive in case strong demand conditions pose risks to the inflation outlook. The CBA’s plan to transition to a risk-based approach to price stability should ensure that the credibility of the inflation targeting framework is preserved. The flexible exchange rate has served Armenia well in absorbing external shocks, while building reserve buffers.
“In the face of rising financial sector risks, particularly in the housing sector, the CBA should advance its prudential regulation and supervisory reforms. Efforts should focus on preserving capital buffers, enhancing supervisory powers and capacities, and strengthening crisis management.
“Advancing structural reforms will support sustainable and inclusive growth. The authorities’ efforts to raise labor force participation and reduce structural unemployment, ease access to finance, diversify exports, and strengthen governance will enhance economic resilience and uplift potential growth.”
Table 1. Armenia: Selected Economic and Financial Indicators, 2020–25
|
|
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
|
|
Act. |
Act. |
Prel. |
|
Proj |
|
|
National income and prices: |
||||||
|
Real GDP (percent change) |
-7.2 |
5.7 |
12.6 |
7.0 |
5.0 |
4.5 |
|
Final consumption expenditure, Contrib. to Growth |
-10.5 |
4.0 |
6.6 |
7.5 |
2.2 |
2.6 |
|
Gross fixed capital formation, Contrib. to Growth |
-0.2 |
1.1 |
1.7 |
2.2 |
2.9 |
2.0 |
|
Changes in inventories, Contrib. to Growth |
0.1 |
0.7 |
-0.9 |
-1.0 |
0.0 |
0.0 |
|
Net exports of goods and services, Contrib. to Growth |
3.4 |
-0.2 |
5.2 |
-1.6 |
-0.1 |
-0.1 |
|
Gross domestic product (in billions of drams) |
6,182 |
6,983 |
8,501 |
9,424 |
10,325 |
11,211 |
|
Gross domestic product (in millions of U.S. dollars) |
12,642 |
13,861 |
19,514 |
23,787 |
24,745 |
26,569 |
|
Gross domestic product per capita (in U.S. dollars) |
4,269 |
4,679 |
6,587 |
8,029 |
8,352 |
8,967 |
|
CPI (period average; percent change) |
1.2 |
7.2 |
8.6 |
2.7 |
3.9 |
4.0 |
|
CPI (end of period; percent change) |
3.7 |
7.7 |
8.3 |
2.5 |
4.0 |
4.0 |
|
GDP deflator (percent change) |
1.8 |
6.9 |
8.1 |
3.6 |
4.3 |
3.9 |
|
Unemployment rate (in percent) |
18.2 |
15.5 |
13.0 |
13.5 |
14.0 |
14.0 |
|
Investment and saving (in percent of GDP) |
||||||
|
Investment |
19.7 |
20.7 |
21.7 |
23.3 |
24.0 |
23.8 |
|
National savings |
15.7 |
17.2 |
22.5 |
20.2 |
20.9 |
20.2 |
|
Money and credit (end of period) |
||||||
|
Reserve money (percent change) |
18.3 |
17.1 |
5.0 |
1.3 |
4.0 |
6.0 |
|
Broad money (percent change) |
9.0 |
13.1 |
16.1 |
15.9 |
10.3 |
7.2 |
|
Private sector credit growth (percent change) |
14.3 |
-3.9 |
4.5 |
13.2 |
7.5 |
5.9 |
|
Central government operations (in percent of GDP) |
||||||
|
Revenue and grants |
25.2 |
24.1 |
24.3 |
25.2 |
25.1 |
25.2 |
|
Of which: tax revenue |
22.0 |
22.1 |
21.9 |
22.9 |
23.1 |
23.3 |
|
Expenditure |
30.6 |
28.7 |
26.4 |
28.2 |
29.7 |
29.0 |
|
Overall balance on a cash basis |
-5.4 |
-4.6 |
-2.1 |
-2.9 |
-4.6 |
-3.8 |
|
Public and publicly-guaranteed (PPG) debt |
||||||
|
(in percent of GDP) |
67.4 |
63.4 |
49.2 |
50.3 |
50.1 |
50.8 |
|
Central Government's PPG debt (in percent) |
63.5 |
60.3 |
46.7 |
47.5 |
47.5 |
48.4 |
|
Share of foreign currency Central Government PPG debt |
||||||
|
(in percent) |
75.6 |
71.2 |
62.1 |
58.2 |
55.8 |
51.7 |
|
External sector |
||||||
|
Exports of goods and services (in millions of U.S. dollars) |
3,818 |
5,012 |
10,038 |
12,313 |
12,269 |
12,913 |
|
Imports of goods and services (in millions of U.S. dollars) |
-5,082 |
-6,120 |
-10,186 |
-13,043 |
-13,192 |
-13,990 |
|
Exports of goods and services (percent change) |
-34.1 |
31.3 |
100.3 |
22.7 |
-0.4 |
5.2 |
|
Imports of goods and services (percent change) |
-33.2 |
20.4 |
66.5 |
28.0 |
1.1 |
6.0 |
|
Current account balance (in percent of GDP) |
-4.0 |
-3.5 |
0.8 |
-3.1 |
-3.1 |
-3.6 |
|
FDI (net, in millions of U.S. dollars) |
86 |
342 |
948 |
437 |
461 |
530 |
|
Gross international reserves (in millions of U.S. dollars) |
2,616 |
3,230 |
4,112 |
4,004 |
3,903 |
4,006 |
|
Import cover 1/ |
5.1 |
3.8 |
3.8 |
3.6 |
3.3 |
3.2 |
|
End-of-period exchange rate (dram per U.S. dollar) |
523 |
480 |
394 |
… |
… |
… |
|
Average exchange rate (dram per U.S. dollar) |
489 |
504 |
436 |
… |
… |
… |
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] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
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