No economic growth in Armenia in 2015 – IMF

The International Monetary Fund (IMF) forecasts no - or insignificant - economic growth in Armenia for this year, Masood Ahmed, Director, Middle East and Central Asia Department, International Monetary Fund (IMF), told reporters on Tuesday.

The IMF forecasts 1% economic growth in Armenia for next year.

The economic situation in Russia and the declining oil prices influence the regional countries. Specifically, the economic decline in Russia, a 40% decrease in money remittances and a decline in exports affected Armenia. Hardly any economic growth will be registered in Armenia this year, but the IMF hopes its forecasts will not prove accurate, Mr Ahmed said.

Armenia is suffering consequences of the 2009 crisis as it has used up the financial buffers accumulated over the years.

In recent years, Armenia has borrowed funds thus increasing its foreign debt. Armenia’s international reserves are at an acceptable level, but they cannot be used on a large scale now. It means Armenia is faced with two major challenges now – short-term and mid-term ones. In the first case, in the next 12-18 months, economy managers need to find the golden mean. In the mid-term, they should make efforts to raise the economic growth to a higher level than 3-3.5 percent.

The government should channel some of government expenditures to economy as investments. The government must support the private sector by improving the business environment, Mr Ahmed said.

The IMF official went on to elaborate on their role in the activities outlined. He said that the Fund, which has been collaborating with Armenia for two decades, has offered its best support to the country over the period. He said added that their current project, proposed Armenia’s Government, is being successfully implemented but stressed the importance of more efforts to adapt it to the new realities.

Asked whether he expects new shocks likely to impact the country’s economy, Mr Ahmed said he doesn’t think that any new development creating such an effect would be termed as a shock were predictable in advance.

He said he outlines a “positive shock” for a country like Armenia in light of the stabilization trends observed on the Russian market. The IMF official added that a possible thaw between Iran, Armenia’s southern neighbor, and the international community, would inspire more positive hopes. He said he expects a successful completion of the debates and talks to increase the capital flows to Armenia.

Mr Ahmed further highlighted the importance of the observed diversification in the sources of growth. He noted that unlike the situation several years ago (when the economy developed largely due to assets received from the development sector), there is now progress in other areas as well, including the IT industries and mining. He called for further efforts towards increasing the sources of growth in order promote a higher competitiveness and better access to different markets.