YEREVAN -- The International Monetary Fund (IMF) has said it has scaled down its growth projection for Armenia by 20 percent because of a sharp fall in the country's agricultural output, RFE/RL's Armenian Service reports.
Economic growth in Armenia had progressively accelerated from January through May on the back of rising international metal prices and remittance inflows from Armenians working abroad.
As recently as June, Finance Minister Tigran Davtian forecast a full-year growth rate of 7 percent. The IMF was more cautious, saying growth will come in at around 5 percent.
The latest macroeconomic data led the IMF to slash the projection to "about 4 percent."
According to the National Statistical Service (NSS), Armenia's Gross Domestic Product (GDP) rose by 3.1 percent during the first eight months of this year. That is down from the NSS's recorded rate of 6.7 percent in the first six months of 2010.
NSS data shows 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.
"We scaled down 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 IMF'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 said at a news conference.
The sector was hit hard by an unusually cold and rainy spring. Heavy rain and hailstorms caused serious damage to farms across Armenia, dramatically pushing up the cost of fruits and vegetables.
The unfavorable weather conditions don't appear to have seriously damaged key autumn crops such as grains and grapes, however. 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 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 should 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, but also urged them to take "further steps to modernize tax administration and reduce tax evasion."
IMF officials also called for "bolder and deeper reforms" needed to improve Armenia's business environment.