ECONOMY OF ARMENIA REMAINS "COMPETITIVE ON THE WHOLE"
By Ara Martirosian

AZG Armenian Daily
04/07/2007

In order to preserve the competitiveness, the Government of Armenia
should invest additional efforts, according to the Head of IMF
delegation in Armenia

After the meeting with the representatives of RA Government, Central
Bank, International donors and Armenian businessmen, the Head of
International Monetary Fund (IMF) mission’s Armenian group Ms. Marta
Castello-Branco met with the reporters in Armenia, on July 2.

Summarizing the recorded indexes of Armenian economy of the first 5
months of 2007, she stated that the indexes remained "impressive",
as the growth of GDP exceeded the expectations and the inflation was
consonant with the purposeful index.

According to the representative of IMF, Armenia is notable for
its combination of high economic growth and low inflation in the
region. Armenia has recorded progress in tax-collecting sphere,
though there are more opportunities of progress in this sphere.

Ms. Marta Castello-Branco stressed the importance of preserving the
high rates of the economic growth and the urgency of further reducing
of poverty.

At the same time she expressed concern over the rapid rise of wheat in
international market, which might have an influence upon the economic
growth index of Armenia.

The economic growth index may be influenced also by Central Bank,
which buys dollar to reduce the rapid shakings of currency value.

The next possible factor on the economic growth index is that fewer
expenses are run up in the first half of this year and the increase
in the expenses of the second half of this year may record surplus
inflation.

There are three main issues in the economy of Armenia according to
IMF representative of Armenia: the amendments in pension system,
gas subsidization and competition of economy.

IMF welcomes the new project of the Armenian Government to improve the
pension system. The pensions are very low in Armenia at present. It’s
necessary to increase the subtractions for the pensions and to raise
the pensions. It may also influence the inflation index.

The next issue is the subsidization of gas, as the subsidization time
of the gas ends by the end of 2008, and after it the gas prices will
rise rapidly. There is a big threat that the consumer prices will also
have a rapid rise influenced by the gas prices. IMF representative
advised the Government to reduce the subsidization gradually. And
also to subsidize only socially not provided strata.

The issue of the competition of Armenian economy is connected with
the valuation of Armenian dram. In spite of a great number of inflows
of foreign currency, which have a negative influence on some export
spheres and the households that are dependent on private transfers,
the IMF records that the economy of Armenia remains "competitive on
the whole". In order to preserve the competitiveness, the Government
of Armenia should invest additional efforts to improve the business
environment and to increase the productivity.