Republic of Armenia: First Review Under the Stand-By Arrangement, Request for Modification of Performance Criteria and Monetary Policy Consultation Clause-Press Release; and Staff Report

This paper presents Republic of Armenia’s First Review under the Stand-by Arrangement. Armenia’s economic activity remains strong. Short-term risks to the outlook stem from the unprecedented uncertainty related to the war in the Middle East. Over the medium term, a potential slowdown in the growth of trading partners and tighter global financial conditions could affect Armenia. However, external and financial sector buffers remain strong. Strong fiscal performance is anticipated to continue in 2026. A sizable revenue overperformance is expected compared to the 2026 budget, supported by strong economic activity, tax policy measures, and ongoing revenue administration improvements. The central bank should continue to monitor economic developments, inflation dynamics, and inflation expectations closely and stand ready to adjust policy rates as needed to bring inflation back to target. In order to sustain long-term growth, planned structural reforms to encourage diversification in the country’s export basket and markets, improve the business environment and corporate transparency, and enhance access to finance are welcome.