The International Monetary Fund said on Wednesday that it has revised downwards its most recent growth projection for Armenia because of a sharp fall in the country’s agricultural output resulting from bad weather.
According to official statistics, Armenia’s Gross Domestic Product rose by 3.1 percent during the first eight months of this year. The National Statistical Service (NSS) recorded a growth rate of 6.7 percent in the first half of 2010.
NSS data show that the economic slowdown was mainly attributable to a 18 percent year-on-year slump in agricultural production, which generated more than 14 percent of the GDP in January-August. A 2.4 percent contraction of the Armenian construction sector, still reeling from the 2009 global recession, was another factor.
Economic growth in the country had progressively accelerated from January through May on the back of rising international metal prices and remittances inflows from Armenians working abroad. As recently as in June, Finance Minister Tigran Davtian forecast a full-year growth rate of 7 percent. The IMF was more cautious, saying that growth will come in at around 5 percent.
The latest macroeconomic data led the IMF to slash the projection to “about 4 percent.” “We revised downwardly our GDP projection for 2010 exclusively because the extent of the shock to the agricultural sector had not been anticipated in our previous missions,” said Guillermo Tolosa, the fund’s resident representative in Yerevan.
“It is interesting because the agricultural sector was one of the few sectors, if not the only one, that had sort of avoided the effects of the international storm that took place in 2009 only to suffer a very homegrown Armenian storm in 2010,” Tolosa told a news conference.
The sector was hit hard by an unusually cold and rainy spring. Heavy rain and hailstorms caused serious damage to farmers across Armenia, dramatically pushing up the cost of fruits and vegetables.
The unfavorable weather conditions appear to have not inflicted serious damage on key autumn crops such as grain and grapes, though. The sector’s full-year performance is therefore expected to be less dismal.
In a separate written statement, the IMF insisted that Armenia is “slowly recovering” from last year’s recession that resulted in a more than 14 percent fall in GDP. It predicted that the Armenian economy will expand by 4.5 percent next in 2011.
The statement followed a two-week visit to Yerevan by a high-level IMF mission led by Ratna Sahay, deputy director of the fund’s Middle East and Central Asia Department. It said the mission’s talks with senior Armenian officials could lead to the disbursement of a fresh $56 million installment of a $395 million loan package for Armenia approved by the IMF in June.
The statement reaffirmed the fund’s largely positive assessment of the Armenian authorities’ economic policies. It said the mission at the same time urged them to take “further steps to modernize tax administration and reduce tax evasion.” The IMF officials also called for “bolder and deeper reforms” needed to improve Armenia’s business environment, it said.