ARMENIAN ECONOMY TO GET BACK ON RECOVERY TRACK IN 2010: IMF

ARKA
Nov 3, 2009

YEREVAN, November 3, /ARKA/. International Monetary Fund (IMF) Deputy
Managing Director and Acting Chair said today that "The global crisis
has continued to have a serious impact on the Armenian economy. While
output appears to be stabilizing, the fall in remittances and the
collapse in the construction sector have caused a more severe economic
contraction and lower fiscal revenue than anticipated in the first
review. The authorities have fully implemented their economic program,
which calls for the continuation of fiscal and monetary easing and
a flexible exchange rate.

His remarks came after the Executive Board of the International
Monetary Fund (IMF) has completed the second review of Armenia’s
economic performance under a program supported by a Stand-By
Arrangement (SBA) and approved a request for a waiver of nonobservance
of end-September 2009 fiscal balance performance criterion,
modification of the quantitative performance criteria for end-December
2009 to reflect the revised macroeconomic framework and rephasing of
purchases to make the amounts scheduled to become available following
the second and third review available upon completion of the second
review. These decisions enable the immediate release of SDR 37.72
million (about US$60 million), bringing the total disbursed to SDR
301.94 million (about US$479 million).

He said,’ In light of continuing weak domestic demand, the authorities
will maintain fiscal easing this year, with external resources
taking up the revenue slack. Expenditure will focus on undertaking
anti-crisis measures, increasing capital spending, and protecting
social spending. The authorities are committed to starting fiscal
consolidation in 2010, with a view to ensuring medium-term debt
sustainability. The program allows for additional spending should
more donor financing become available to smooth the withdrawal of
fiscal stimulus.

"An accommodative monetary policy stance remains appropriate given
low inflation. The move to a more flexible exchange rate has served
Armenia well, helping the economy avoid significant overvaluation and
increasing the effectiveness of monetary policy. However, given the
remaining weaknesses in the monetary transmission mechanism, targeted
measures now being implemented to stimulate credit are crucial.

"The short-term outlook remains challenging. As external conditions
improve, growth is expected to resume gradually in 2010, although
risks remain, including a slower recovery of the global economy.

Continued reforms, particularly in the areas of tax policy and
tax reform administration, the financial sector, and the business
environment will be necessary to boost the medium-term growth potential
of the economy," Mr. Kato said.

The Armenian government, the World Bank and the International Monetary
Fund have all forecasted that the full-year economic contraction will
be between 12-15%. They also expect the economy to grow next year by
1%.

From: Emil Lazarian | Ararat NewsPress