The International Monetary Fund remains satisfied with the Armenian authorities’ response to the global economic downturn and expects Armenia’s economy to resume its growth already next year, a senior IMF official said on Wednesday.
Mark Lewis, head of a visiting IMF mission, also said that the recession-hit economy would significantly benefit from a possible reopening of the Turkish-Armenian border. He argued that an open frontier with Turkey would open a new and lucrative market to Armenian exporters, reduce the cost of imports to the landlocked South Caucasus state and foster regional economic integration.
“So in sum, we would see higher growth, higher exports and investment, and improved standards of living of the Armenian population,” Lewis told a news conference in Yerevan.
The mission headed by him has spent the past two weeks meeting top Armenian government and Central Bank officials to discuss their anti-crisis measures supported by an IMF loan approved in March. The fund raised the total amount of the “stand-by arrangement” by more than half to $823 million in June, citing the sharper-than-anticipated impact of the global recession on the country. About $158 million of the extra funding was immediately made available to the Armenian authorities.
Lewis indicated that his talks in Yerevan paved the way for the disbursement next month of another installment of the loan worth about $60 million. He praised the authorities for their “very good performance” in taking steps which the IMF believes are necessary for coping with the crisis.
“In terms of the broader question of managing the crisis, we also think that the authorities have done a very good job,” he said. “The global economic environment is very difficult and almost all countries have had to confront this crisis.”
The IMF official pointed out that the Armenian government has been “very effective” in attracting more than $1.5 billion emergency loans from external sources that have allowed it avoid major spending cuts despite a serious shortfall in tax revenues. He also commended the Central Bank for seeking to spur bank credit to Armenian firms while maintaining the relative stability of the country’s financial system.
According to Lewis, the IMF anticipates that these and other anti-crisis policies will help the Armenian economy expand by 1.2 percent in 2010. He said the growth will be primarily driven by rising international prices of non-ferrous metals (Armenia’s number one export item) as well as domestic services and agriculture.
Armenia’s Gross Domestic Product plummeted by as much as 18.5 percent year on year in the first seven months of 2009 mainly because of a dramatic slump in the construction sector.
“For the remainder of year we see construction activity stabilizing and some small improvement in other areas,” said Lewis. That is why, he added, the IMF expects the full-year GDP contraction to ease to 15.6 percent.