Weaker growth and FDI inflows than expected
Overview:
The economy is starting to show signs of recovery after the stresses caused by the war with Russia in August 2008 and the rapid intensification of the global economic crisis shortly afterwards. Economic policy implementation remains strong which has facilitated regular disbursements under the IMF program. Nevertheless, the economic contraction suffered has proved deeper than expected and FDI inflows have disappointed. A flexible exchange rate, a stable banking sector and an expansion and extension of the IMF program are helping to tackle these shortfalls relative to expectations. The current account deficit is shrinking rapidly, inflation is low, banking deposits are growing and FX reserve levels are now adequate. However, the economic recovery will be slow as the fiscal stance needs to be tightened significantly.