Armenia's economy continues to perform strongly. Prudent fiscal and monetary policies, strong external inflows, and ongoing structural reforms have contributed to double-digit growth, low inflation, and declining poverty in 2005. The outlook is for continued robust growth in 2006, underpinned by buoyant investment and remittance inflows.

The authorities made good progress in structural reforms in 2005. They adopted a comprehensive two-year Tax Action Plan to improve tax and customs administrations. Two major amendments to tax legislation that reduce exemptions and loopholes have been submitted to parliament. Moreover, an operational review of customs is currently under way. Steps have also been taken to strengthen banking supervision and improve corporate governance of the financial sector. The financial performance of the energy, water, and irrigation sector has continued to improve.

The thrust of the authorities' economic program for 2006 is to maintain macroeconomic stability and keep inflation below 3 %. The Central Bank of Armenia will continue to focus on maintaining price stability, and to limit intervention in the foreign exchange market to smoothing out volatility in the exchange rate.

The government will also continue to pursue reforms aimed at enhancing growth prospects and alleviating poverty. In particular, structural reforms in the fiscal area focus on improving tax and customs administration to mobilize domestic revenues to finance capital, and social expenditures. As part of the efforts to improve the business climate, the government will continue with the implementation of its anti-corruption action plan. Financial sector reforms should boost financial intermediation and reforms in the public utility sector will emphasize improving its services and financial viability.

Augustin Carsten, International Monetary Fund