IMF: Armenia needs structural reforms

PanARMENIAN.Net - Recovery is underway in Armenia in 2010, but the pace is slow, according to the IMF Executive Board.

As the external environment has improved, industry and services are rebounding, but agriculture has been hit hard by adverse weather. With a rebound of agriculture, output is expected to grow by 4 percent in 2010, slower than the 6½ percent pace registered in the first half of the year, and by 4½ percent next year, the Public Information Notice said.

The contraction of agricultural output and a rise in imported wheat prices have translated into higher food prices. Comprising nearly half of the weight of the consumer price index, higher food prices have pushed annual inflation over 9 percent in recent months. However, as food price shocks recede, inflation should decline to 7 percent by end-2010, and with appropriate monetary and fiscal policies in place, to the central bank’s target of 4±1.5 percent during the second half of 2011.

As the economy recovers, the authorities’ focus is shifting to medium-term challenges, including restoring strong growth - from new sources - and reducing poverty, ensuring fiscal and debt sustainability, and maintaining financial sector stability. Post-crisis policies include fiscal consolidation, increased exchange rate flexibility, continued commitment to price stability, strengthening the banking sector, and stepping up structural reforms.