YEREVAN. - IMF expects Armenia’s economy to grow by 3 percent in 2017, Mr Hossein Samiei, IMF mission chief to Armenia, told journalists  a briefing held in Yerevan Wednesday. 

Upside factors include economic recovery in Russia, from where dozens of thousands Armenian seasonal workers send money back home. In the last two years—after economic slowdown in Russia—revenues have shrunk, but in 2016 they still accounted for $656 million or slightly above 6 percent of GDP. Besides, Russia is the main export market for Armenian finished goods (most notably brandy and agricultural products). Another good sign is that the prices of copper are picking up (copper concentrate is the largest export commodity of Armenia, while semi-finished copper is in the top 10).

Growth will be achieved through budget austerity, because of a limited fiscal space after two years of countercyclical fiscal and monetary policy. This helped to shore up internal demand, which was still negative in 2016. As a result, economic growth was only 0.2 percent.

This led to a low inflation, which in turn shot back on revenue collection, the latter falling short of the plan by 80 billion AMD, or around 7 percent of projected fiscal revenues.

At the sane time, capital expenditures were larger, to prop up the economy in the short term. This has brought fiscal deficit to around 5.6 percent of GDP (up from 4,8 percent in 2015). Financial authorities will respond by a more cautious approach in borrowing, intending to narrow down the deficit to 2.8 percent.

The authorities are counting on increasing revenue collection, extra taxation coming from recovering activity and tighter fiscal administration. Accordingly, in Q1 2017 revenues were already higher than projected by about 0.3 percent of GDP.