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A leading international lending institution has slightly reduced the growth projection for the Armenian economy in 2012, but expects the country’s inflation to remain around the government’s target.

At a press conference in Yerevan on Tuesday an International Monetary Fund (IMF) official summed up the results of a nearly two-week-long mission in Armenia discussing the Fourth Review of the Extended Fund Facility/Extended Credit Facility arrangements.

The Executive Board of the IMF is tentatively scheduled to consider completion of the review in May. Upon approval the IMF would disburse the fourth tranche of the loan for an amount of about $56 million, bringing disbursements under the arrangement to about $279 million.

Mark Horton, who has led the mission on its visit to Yerevan on March 14-27, said that “against the backdrop of weak external environment” the growth projection for Armenia for 2012 has been reduced to 3.8 percent from the earlier 4.0-percent level. The Armenian government expects the country’s economy to expand by 4.2 percent this year.

“We expect that inflation this year will be right around 4 percent, which is the Central Bank’s target,” he added.

Horton warned that slow economic growth could spell risks for Armenia’s projected budget revenues. “But I think there were some risks to the tax projections already in the baseline,” he added.

In a statement at the conclusion of the mission the IMF official, in particular, said that overall macroeconomic conditions in Armenia have continued to improve, while external imbalances have moderated “through continuing fiscal adjustment as well as strong export and remittances growth”.

“But the external current account deficit remains relatively large and further adjustment is needed to reduce vulnerabilities,” he said.

“With continued fiscal consolidation over the medium-term, the authorities’ welcome focus on export growth and other business environment improvements, strong remittances, and exchange rate flexibility, the current account deficit is expected to continue to decline,” the IMF official concluded.
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