“Going forward, the economic outlook is generally positive with medium-term growth projected around 4.5-5 percent, contingent upon the COVID-19 developments, external demand, and progress on structural reforms implementation,” the IMF said in a statement issued late last week.
The government’s five-year policy program approved by the Armenian parliament in August says that the country’s GDP should increase by 7 percent annually.
The Armenian economy contracted by 7.4 percent last year due to adverse effects of the coronavirus pandemic compounded by the war in Nagorno-Karabakh. It returned to growth this spring.
Prime Minister Nikol Pashinian said in July that GDP growth will reach 6 percent this year. The IMF and the World Bank forecast more modest growth rates afterwards.
“An economic rebound is now underway, with projected growth of around 5.5 percent in 2021,” read the latest IMF statement.
The governor of Armenia’s Central Bank, Martin Galstian, predicted on December 14 an even lower growth rate for this year: 4.2 percent. Presenting the bank’s latest projections, he said growth should accelerate to 5.3 percent in 2022.
Armenia’s 2022 state budget approved by the parliament earlier this month is based on a 7 percent growth target set by Pashinian’s government. It calls for significant increases in public spending and tax revenue. Opposition politicians and some economists say the government targets are not realistic.
As well as predicting slower growth, the IMF praised the government’s five-year program and, in particular, reforms envisaged by it. It also said the Armenian authorities “appropriately responded” to the 2020 recession.
“The Fund’s financial support will help Armenia meet its challenges -- including the social and economic implications of COVID-19 pandemic -- while moving ahead with its reform agenda,” added the statement.
The IMF made its latest growth projections as it announced the disbursement of a fresh $72 million installment of a $432 million Stand-By Arrangement, a loan designed to help Armenia cope with economic consequences of the pandemic.
The loan tranche brought to about $396 million the total amount of funds allocated to the country under the three-year lending program launched in May 2019.