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IMF tells Armenia to press ahead with reforms, expects 4.5 pct growth

Reuters | Updated: 19-03-2019 17:46 IST | Created: 19-03-2019 17:46 IST
IMF tells Armenia to press ahead with reforms, expects 4.5 pct growth
The International Monetary Fund expects Armenia's economic growth to slow to 4.5 percent this year from 5.2 percent in 2018, reflecting the weaker global environment and copper prices, the fund's representative said.

The South Caucasus country of 3.2 million depends heavily on aid and investment from former imperial master Russia, whose economic downturn has hit Armenian exports as well as remittances from Armenians working there in recent years. The economy expanded 5.2 percent year-on-year in 2018 down from 7.5 percent in 2017, the result of a slowdown in economies of Armenia's trading partners and underperformance in the agriculture and mining sectors.

The government expects 4.9 percent growth in 2019. Yulia Ustyugova said the fund projected smaller contribution to growth from final consumption amid weaker remittances this year, although it might be compensated by higher investment.

She said risks to the outlook were mainly external, including "increased global trade tensions, turbulence in global financial markets or a pickup in regional geopolitical tensions". "The key challenge facing policymakers is to press ahead with the carefully-planned structural reforms with maintaining macroeconomic and financial stability," Ustyugova said.

The IMF supports the "ambitious" reform plan of the government led by Prime Minister Nikol Pashinyan, who came to power in a peaceful revolution last spring after weeks of mass protests against corruption and cronyism. Pashinyan bolstered his authority in the former Soviet republic when his political bloc won an early parliamentary election in December.

The reform plan includes changes to tax and custom codes and are focused on fighting corruption and improving the business environment. Ustyugova said the IMF expected the current account deficit to decline to 6-7 percent of gross domestic product in 2019, down from 8 percent last year.

The IMF said in February it had reached a staff-level agreement on a $250-million three-year precautionary stand-by agreement with Armenia "to support the new government's reform plans and strengthen resilience against external shocks". The agreement is subject to approval by the fund's executive board. (Editing by Janet Lawrence)


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