ARMENIA EXPECTS 1.3 PCT GDP GROWTH IN 2010-FINMIN
Hasmik Lazarian
Forbes
Thomson Reuters
09.28.09, 02:07 PM EDT
YEREVAN, Sept 28 (Reuters) – Armenia’s gross domestic product is
expected to grow by 1.3 percent in 2010 after a projected decline of
15 percent this year, Finance Minister Tigran Davtyan said on Monday.
The International Monetary Fund (IMF) said last week Armenia’s GDP
was likely to shrink by 15 percent in 2009, citing a dramatic decline
in the construction sector.
The forecast was sharply down on a June estimate by the IMF of a 9.5
percent contraction in the landlocked country of 3.2 million people.
The Armenian government approved the 2010 budget draft with a 1.3
percent GDP growth, projecting a fiscal deficit at 5.69 percent of
GDP and around four percent annual inflation, the same as in 2009.
The deficit is expected to be financed by aid from donors and financial
organisations as well as by issue of treasury bills.
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‘The 2010 is expected to be quite tense and we will be working to save
our resources,’ Davtyan told a government meeting. He added that the
government will try not to reduce social spending.
The IMF said last week a large drop in tax revenues in 2009 meant the
deficit could reach around 7.5 percent of GDP. The fund forecast GDP
growth in 2010 of 1.2 percent and a fiscal deficit of 5.9 percent.
The GDP contracted by 18.4 percent in January-August of 2009. The
budget draft will be sent to the parliament for approval in the
beginning of October.
Armenia’s sharp economic contraction has been blamed largely on
lower prices for its main exports – copper and molybdenum — and a
30 percent decline in remittances from the huge Armenian diaspora.
Output in construction industry fell by more than 50 percent in the
first half of 2009 while exports almost halved in the first half of
this year despite a 20 percent devaluation of the dram in March.
Armenia is drawing on an $823 0 million but topped up in June, was
secured in March after the Armenian central bank decided to float
the dram currency.
Besides the IMF loan, Armenia is drawing on $1.2 billion in funding
from other international financial institutions and Russia.
Fitch Ratings last month cut Armenia’s long-term foreign and local
currency rating to ‘BB-‘ from ‘BB’ with stable outlook, citing among
other things the country’s heavy dependence on external financing.
Armenia is hoping to reap the economic benefits of rapprochement
with historical foe Turkey, announcing a plan last month to establish
diplomatic relations and open their border, closed since 1993.
Turkey has said it could open the border by the New Year.