An International Monetary Fund (IMF) team, led by Iva Petrova, conducted discussions in Yerevan from September 18 to October 1, 2024, followed by virtual meetings regarding the fourth review under the Stand-By Arrangement (SBA) with Armenia. Ms. Petrova announced that a staff-level agreement has been reached with Armenian authorities on policies for completing this review.
The IMF's Executive Board is expected to consider the review in mid-December. Approval would grant access to approximately US$24.5 million, increasing total access since the SBA's inception to about US$122.7 million.
“Armenia’s economic activity remains robust, with real GDP growing by 6.5 percent in the first half of the year, driven by domestic demand,” stated Ms. Petrova. Employment growth has averaged 19 percent since early 2023, and inflation was low at 0.6 percent year-on-year in September. The current account deficit has widened as temporary factors fade while tourism and remittances normalize.
Prudent execution of the 2024 budget resulted in a small overall fiscal deficit through September, and central government debt stood at a moderate level of 48.4 percent of GDP at end-2023. The banking system maintains strong capital and liquidity buffers along with high profitability.
“The strong growth momentum of the past few years continues to gradually normalize,” Ms. Petrova noted, with GDP growth projected at 6 percent in 2024 and 4.9 percent in 2025 as domestic consumption and external demand slow down.
Inflation is anticipated to remain low short-term and align with the Central Bank of Armenia’s target over time. However, risks include geopolitical tensions, potential setbacks among trading partners, reversal of capital inflows, and rising global food and energy prices.
“The draft 2025 budget appropriately accommodates priority spending needs,” according to Ms. Petrova. It emphasizes national security and refugee integration but highlights the need for careful medium-term expenditure prioritization alongside new tax policies for fiscal consolidation.
In terms of monetary policy, “Amid low inflationary pressures,” Ms. Petrova remarked that “the Central Bank of Armenia (CBA) has continued its gradual reduction of the policy rate.” Future decisions should focus on inflation trends while maintaining healthy international reserve buffers.
Efforts are ongoing to enhance CBA’s policy communication through improved transparency in monetary, foreign exchange, and financial regulation areas.
The government’s structural reform agenda aims at fostering inclusive growth by increasing labor force participation among youth, women, and vulnerable groups; diversifying exports; improving business conditions; implementing governance reforms; upgrading insolvency frameworks; and rationalizing investment incentives.
Ms. Petrova concluded by thanking “the Armenian authorities, private sector, development partners, and diplomatic community for fruitful discussions and cooperation.”