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Armenian Economy To Get Back On Recovery Track In 2010: IMF

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  • Armenian Economy To Get Back On Recovery Track In 2010: IMF

    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
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