World Library  
Flag as Inappropriate
Email this Article

Economy of Armenia

Article Id: WHEBN0000001094
Reproduction Date:

Title: Economy of Armenia  
Author: World Heritage Encyclopedia
Language: English
Subject: Economy of Abkhazia, Economy of Azerbaijan, Economy of Thailand, Economy of Tajikistan, Economy of Moldova
Collection: Economy of Armenia, World Trade Organization Member Economies
Publisher: World Heritage Encyclopedia

Economy of Armenia

Economy ofArmenia
Currency Armenian dram
Calendar year
Trade organisations
GDP Decrease $10.088 billion (nominal, 2014 est.)[1]
$24.31 billion (PPP, 2014 est.)[2]
GDP growth
Decrease3.4% (2014 est.)[3]
GDP per capita
Decrease $3,505 (nominal, 2014 est.)[4]
$7,774 (PPP, 2014 est.)[5]
GDP by sector
agriculture (19.2%), industry (40.8%), services (40%) (2012 est.)
Decrease 3 % (2014)
Population below poverty line
IncreaseIncrease32% (2013)[1]
31.3 (2011)[3]
Labour force
1.194 million (2011 est)
Labour force by occupation
services (44%), industry (17%), agriculture (39%) (2011 est.)[3]
Unemployment IncreaseIncrease17.3% (2014)[3]
Main industries
electric motors, tires, knitted wear, hosiery, shoes, silk fabric, chemicals, trucks, instruments, microelectronics, jewelry manufacturing, software development, food processing, brandy
Exports Decrease$1.519 billion (2014)[3]
Export goods
pig iron, unwrought copper, nonferrous metals, diamonds, mineral products, foodstuffs, energy[7]
Main export partners
 Russia 22.6%
 Bulgaria 10.3%
 Belgium 8.9%
 Iran 6.5%
 United States 6%
 Canada 5.9%
 Germany 5.8%
 Georgia 5.8%
 Netherlands 4.5%
(2013 est.)[8]
Imports Increase$4.402 billion (2014)[3]
Import goods
natural gas, petroleum, tobacco products, foodstuffs, diamonds[9]
Main import partners
 Russia 24.8%
 China 8.6%
 Germany 6.3%
 Ukraine 5.1%
 Turkey 4.7%
 Iran 4.4% (2012 est.)[10]
Increase $8.452 billion (31 December 2014 est.)[3]
Public finances
Increase 42.4% of GDP (2014 est.)
Revenues Decrease$2.825 billion (2014 est.)[3]
Expenses Increase$3.01 billion (2014 est.)[3]
Economic aid $302 million (ODA) (2008)
Foreign reserves
DecreaseUS$1.489 billion (December 2014)[3]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

Azerbaijan and on the south and west by Iran and Turkey.

Until independence, Armenia's economy was based largely on industrychemicals, electronic products, machinery, processed food, synthetic rubber and textiles; it was highly dependent on outside resources. Agriculture accounted for only 20% of net material product and 10% of employment before the breakup of the Soviet Union in 1991. Armenian mines produce copper, zinc, gold and lead. The vast majority of energy is produced with imported fuel, including gas and nuclear fuel from Russia (for its one nuclear power plant.) The main domestic energy source is hydroelectric. Small amounts of coal, gas and petroleum have not yet been developed.

Like other former states, Armenia's economy suffers from the legacy of a centrally planned economy and the breakdown of former Soviet trading patterns. Soviet investment in and support of Armenian industry has virtually disappeared, so that few major enterprises are still able to function. In addition, the effects of the dram, suffered hyperinflation for the first few years after its introduction in 1993.

Armenia has registered strong economic growth since 1995 and inflation has been negligible for the past several years. New sectors, such as precious stone processing and jewelry making and communication technology (primarily Armentel, which is left from the USSR era and is owned by external investors). This steady economic progress has earned Armenia increasing support from international institutions. The International Monetary Fund (IMF), World Bank, EBRD, as well as other international financial institutions (IFIs) and foreign countries are extending considerable grants and loans. Total loans extended to Armenia since 1993 exceed $800 million. These loans are targeted at reducing the budget deficit, stabilizing the local currency; developing private businesses; energy; the agriculture, food processing, transportation, and health and education sectors; and ongoing rehabilitation work in the earthquake zone.

Continued progress will depend on the ability of the government to strengthen its macroeconomic management, including increasing revenue collection, improving the investment climate, and accelerating privatization. A liberal foreign investment law was approved in June 1994, and a law on privatization was adopted in 1997, as well as a program on state property privatization. The government has made major strides toward joining the World Trade Organization. By 1994, however, the Armenian government had launched an ambitious IMF-sponsored economic liberalization program that resulted in positive growth rates in 1995-2005. Armenia joined the Metsamor. Armenia is now a net energy exporter, although it does not have sufficient generating capacity to replace Metsamor, which is under international pressure to close. The electricity distribution system was privatized in 2002. Armenia's severe trade imbalance has been offset somewhat by international aid, remittances from Armenians working abroad, and foreign direct investment. Economic ties with Russia remain close, especially in the energy sector. The government made some improvements in tax and customs administration in 2005, but anti-corruption measures have been more difficult to implement. Investment in the construction and industrial sectors is expected to continue in 2006 and will help to ensure annual average real GDP growth of about 13.9%.


  • Overview 1
  • History of the modern Armenian economy 2
    • Post-communist economic reform 2.1
  • Global competitiveness 3
  • Index of Economic Freedom 4
  • Domestic business environment 5
    • Monopolies 5.1
  • GDP 6
    • Growth 6.1
    • Cash remittances 6.2
    • Secondary sector 6.3
    • Retail trade 6.4
    • Services sector 6.5
      • Tourism 6.5.1
    • Industrial sector 6.6
    • Mining 6.7
    • Agricultural sector 6.8
  • Foreign aid 7
    • United States 7.1
    • European Union 7.2
  • External trade 8
    • Exports 8.1
    • Imports 8.2
    • Deficit 8.3
    • Partners 8.4
      • European Union 8.4.1
      • Russia and former Soviet republics 8.4.2
      • China 8.4.3
      • Iran 8.4.4
      • Turkey 8.4.5
      • United States 8.4.6
      • Georgia 8.4.7
  • Foreign debt 9
  • Transportation routes and energy lines 10
    • Internal 10.1
    • Through Georgia 10.2
    • Through Turkey and Azerbaijan 10.3
    • Through Iran 10.4
  • Labor 11
    • Monthly wages 11.1
    • Unemployment 11.2
    • Migrant workers 11.3
  • Appreciation and depreciation of the dram 12
  • Government revenue and taxation 13
    • New value-added tax 13.1
    • Tax evasion 13.2
  • Environmental issues 14
  • Energy 15
  • Banking 16
  • Takeover of Armenian industrial property by the Russian state and Russian companies 17
    • Controversy over non-transparent deals 17.1
  • Production 18
  • Energy 19
  • See also 20
  • Notes 21
  • Sources 22
    • Books 22.1
  • External links 23


Under the old Soviet central planning system, Armenia had developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics in exchange for raw materials and energy. Since the implosion of the USSR in December 1991, Armenia has switched to small-scale agriculture away from the large agroindustrial complexes of the Soviet era. The agricultural sector has long-term needs for more investment and updated technology. The privatization of industry has been at a slower pace, but has been given renewed emphasis by the current administration. Armenia is a food importer, and its mineral deposits (gold and bauxite) are small. The ongoing conflict with Azerbaijan over the ethnic Armenian-dominated region of Nagorno-Karabakh (which was part of Soviet Azerbaijan) and the breakup of the centrally directed economic system of the former Soviet Union contributed to a severe economic decline in the early 1990s. By 1994, however, the Armenian Government had launched an ambitious IMF-sponsored economic program that has resulted in positive growth rates in 1995-99. Armenia also managed to slash inflation and to privatize most small- and medium-sized enterprises. The chronic energy shortages Armenia suffered in recent years have been largely offset by the energy supplied by one of its nuclear power plants at Metsamor. Continued Russian financial difficulties have hurt the trade sector especially, but have been offset by international aid, domestic restructuring and foreign direct investment.

History of the modern Armenian economy

At the beginning of the 20th century, the territory of present-day Armenia was a backward agricultural region with some copper mining and cognac production. From 1914 through 1921, Caucasian Armenia suffered from war, revolution, the influx of refugees from Turkish Armenia, disease, hunger and economic misery. About 200,000 people died in 1919 alone. At that point, only American relief efforts saved Armenia from total collapse.budget ran large deficits.[11]

100 million rubles banknote

The first Soviet Armenian government regulated economic activity stringently, nationalising all economic enterprises, requisitioning grain from peasants, and suppressing most private market activity. This first experiment of state control ended with the advent of Soviet leader Vladimir Lenin's New Economic Policy (NEP) of 1921–27. This policy continued state control of the large enterprises and banks, but peasants could market much of their grain, and small businesses could function. In Armenia, the NEP years brought partial recovery from the economic disaster of the post-World War I period. By 1926 agricultural production in Armenia had reached nearly three-quarters of its prewar level.[11]

By the end of the 1920s, Stalin's regime had revoked the NEP and established a state monopoly on all economic activity. Once this occurred, the main goal of Soviet economic policy in Armenia was to turn a predominantly agrarian and rural republic into an industrial and urban one. Amongst other restrictions, peasnats now were forced to sell nearly all their output to state procurement agencies rather than at the market. From the 1930s through the 1960s, an industrial infrastructure was constructed. Besides hydroelectric plants and canals, roads were built and gas pipelines were laid to bring fuel and food from Azerbaijan and Russia.[11]

The Stalinist command economy, in which market forces were suppressed and all orders for production and distribution cam from state authorities, survived in all its essential features until the fall of the Soviet regime in 1991. In the early stages of the communist economic revolution, Armenia underwent a fundamental transformation into a "proletarian" society. Between 1929 and 1939, the percentage of Armenia's work force categorised as industrial workers grew from 13% to 31%. By 1935 industry supplied 62% of Armenia's economic production. Highly integrated and sheltered within artificial barter economy of the Soviet system from the 1930s until the end of the communist era, the Armenian economy showed few signs of self-sufficiency at any time during that period. In 1988 Armenia produced only 0.9% of the net material product of the Soviet Union (1.2% of industry, 0.7% of agriculture). The republic retained 1.4% of total state budget revenue, delivered 63.7% of its NMP to other republics, and exported only 1.4% of what it produced to markets outside the Soviet Union.[12]

Armenia's industry was especially dependent on the Soviet military-industrial complex. About 40% of all enterprises in the republic were devoted to defence, and some factories lost 60% to 80% of their business in the last years of the Soviet Union, when massive cuts were made in national defence expenditures. As the republic's economy faced the prospects of compiting in world markets in the mid 1990s, the great liabilities of Armenia's industry are its outdated equipment and infrastructure and the pollution emitted by many of the country's heavy industrial plants.[13]

In 1991, Armenia's last year as a Soviet republic, national income fell 12% from the previous year, while per capita groos national product was 4,920 rubles, only 68% of the Soviet average. In large part due to the earthquake of 1988, the Azerbaijani blockade that began in 1989 and the collapse of the international trading system of the Soviet Union, the Armenian economy of the early 1990s remained far below its 1980 production levels. In the first years of independence (1992–93), inflation was extremely high, productivity and national income dropped dramatically, and the national budget ran large deficits.[14]

Post-communist economic reform

Armenia introduced elements of the free market and privatisation into their economic system in the late 1980s, when Mikhail Gorbachov began advocating economic reform. Coopratives were set up in the service sector, particularly in restaurants, although substantial resistance came from the Communist Party of Armenia (CPA) and other groups that had enjoyed privileged position in the old economy. In the late 1980s, much of Armenia's economy already was opening either semi-officially or illegally, with widespread corruption and bribery. The so-called mafia, made up of interconnected groups of powerful officials and their relatives and friends, sabotaged the efforts of reformers to create a lawful market system. When the December 1988 earthquake brought millions of dollars of foreign aid to the devastated regions of Armenia, much of the money went to corrupt and criminal elements.[15]

Beginning in 1991, the democratically elected government pushed vigorously for privatisation and market relations, although its efforts were frustrated by the old ways of doing business in Armenia, the Azerbaijani blockade, and the costs of the

  1. Natural gas import and distribution, held by ArmRosGazprom (ARG) (controlled by Russian monopoly Gazprom)[28]
  2. Armenia's railway, held by the Russian-owned South Caucasus Railway (SCR) (formerly Russia’s state-run rail company, RZD)[29]
  3. Oilimport and distribution (claimed by Armenian opposition parties to belonging to a handful of government-linked individuals,[30] one of which - "Mika Limited" - is owned by Mikhail Baghdasarian,[31] while the other - "Flash" - is owned by Barsegh Beglarian, a "prominent representative of the Karabakh clan"[32])
  4. Aviation kerosene (supplying to Zvartnots airport), held by Mika Limited[33]
  5. Various basic foodstuffs such as rice, sugar, wheat, cooking oil and butter[34][35] (the Salex Group enjoys a de facto monopoly on imports of wheat, sugar, flour, butter and cooking oil. Its owner is parliament deputy Samvel Aleksanian (a.k.a. "Lfik Samo") a figure close to the country’s leadership.[36][37])
  6. Newspaper distribution, held by Haymamul (some newspaper editors believe that Haymamul deliberately refuses to print more newspaper copies in order to minimize the impact of unfavorable press coverage of the government)[38]
  7. Former major monopolies in Armenia include:

    1. Wireless (mobile) telephony, held by Armentel until 2004[39]
    2. Internet access, held by Armentel until September 2006[40]
    3. Fixed-line telephony, held by Armentel until August 2007[41]


    The Gross Domestic Product of Armenia stood at 8.8 billion US dollars in 2010; with a population of 3.2 million, this amounts to a GDP per capita of $2,676 (purchasing power parity $5,178).[22] GDP growth for 2010 was at 2.9 percent, and inflation was at 8 percent.[22]

    GDP growth is expected to be around 3 percent in 2011, with inflation returning to 4-5 percent.[22]

    In comparison, in 2006, the GDP was estimated to be 6.6 billion USD per calendar year and the GDP per capita (purchasing power parity) was estimated at $5,400 US. The growth rate was high at 13.4%, but the relatively low base must be considered. Low inflation was maintained around 2.6% annually.[42]


    After a decade of double-digit growth, Armenia's economy declined by 14.4 percent in 2009.[22] The year-to-date growth as of October 2010 was 2.8 percent.[22] In 2010, the main macro deficiencies of the Armenian economy — namely, unsustainable growth drivers, a narrow and resource-dominated export base, and overdependence on private transfers — were still prevalent.[22]

    According to official figures, Armenia’s economy grew by 13.8 percent in 2007.[43] According to research funded by the [44]

    According to the National Statistical Service, the booming construction and service sectors remain the driving forces of the high growth rate of GDP.[45]

    Cash remittances

    Cash remittances sent back home from Armenians working abroad—mostly in Russia and the United States—are growing and contribute significantly to Armenia's Gross Domestic Product (between 15 to 30 percent). They help Armenia sustain double-digit economic growth and finance its massive trade deficit.

    According to the Central Bank of Armenia, during the first half of 2008, cash remittances sent back to Armenia by Armenians working abroad rose by 57.5 percent and totaled $668.6 million USD, equivalent to 15 percent of the country's first-half Gross Domestic Product.[46] However, the latter figures only represent cash remittances processed through Armenian commercial banks. According to RFE/RL, comparable sums are believed to be transferred through non-bank systems, implying that cash remittances make up approximately 30 percent of Armenia's GDP in the first half of 2008.[46]

    In 2007, cash remittances through bank transfers rose by 37 percent to a record-high level of $1.32 billion USD.[46] According to the Central Bank of Armenia, in 2005, cash remittances from Armenians working abroad reached a record-high level of $1 billion, which is worth more than one fifth of the country’s 2005 Gross Domestic Product.[47]

    Net private transfers decreased in 2009, but saw a continuous increase during the first six months of 2010. Since private transfers from the Diaspora tend to be mostly injected into consumption of imports and not in high value-added sectors, the transfers have not resulted in sizeable increases in productivity.[22]

    Secondary sector

    Armenia experienced a construction boom during the latter part of the 2000s. According to the National Statistical Service, Armenia's booming construction sector generated about 20 percent of Armenia's GDP during the first eight months of 2007.[45] According to a World Bank official, 30 percent of Armenia's economy in 2009 came from the construction sector.[27]

    However, during the January to September 2010 period, the sector experienced a 5.2 percent year-on-year decrease, which according to the Civilitas Foundation is an indication of the unsustainability of a sector based on an elite market, with few products for the median or low budgets.[22] This decrease comes despite the fact that an important component of the government stimulus package was to support the completion of ongoing construction projects.[22]

    Retail trade

    In 2010, retail trade turnover was largely unaltered compared to 2009.[22] The existing monopolies throughout the retail sector have made the sector non-responsive to the crisis and resulted in near zero growth. The aftermath of the crisis has started to shift the structure in the retail sector in favor of food products.[22]

    Services sector

    In the 2000s, along with the construction sector, the services sector was the driving force behind Armenia's recent high economic growth rate.[45] In 2010, the volume of services increased as much as 7.4 percent from January to September, over the same period in 2009.[22]


    According to official data, in 2007, a record-high 500,000 tourists visited Armenia — most of them ethnic Armenians from Europe, Russia and the United States.[48] 2010 saw a noticeable increase in the number of Iranian tourists visiting Armenia – estimated to be 80,000.[22]

    However, according to private tour operators and other individuals familiar with the country’s tourism industry, government claims that hundreds of thousands of foreign tourists visit Armenia each year are inflated.[49] Official statistics show that as many 575,000 tourists visited Armenia from abroad in 2009; the government stated earlier in 2010 that the figure will surpass 620,000 in 2010.[49] However, data from the National Statistical Service shows that there were only 65,000 foreigners staying in Armenian hotels in 2009. Ara Vartanian, the chairman of the Armenian Trade and Industry Chamber, thinks that this measure is a far more objective indicator of the tourist influx into the country.[49] In 2012, as many as 843'330 tourists visited Armenia.[50]

    Industrial sector

    Industrial output was relatively positive throughout 2010, with year-on-year average growth of 10.9 percent in the period January to September 2010, due largely to the mining sector where higher global demand for commodities led to higher prices.[22] According to the National Statistical Service, during the January–August 2007 period, Armenia's industrial sector was the single largest contributor to the country's GDP, but remained largely stagnant with industrial output increasing only by 1.7 percent per year.[45] In 2005, Armenia's industrial output (including electricity) made up about 30 percent of GDP.[51]


    40 percent of Armenia's exports in 2009 were mining exports.[27]

    Agricultural sector

    As of 2010, the agricultural production comprises on average 25 percent of Armenia's GDP.[22] In 2006, the agricultural sector accounted for about 20 percent of Armenia's GDP.[52]

    Armenia's agricultural output dropped by 17.9 percent in the period of January–September 2010. This was owing to bad weather, a lack of a government stimulus package, and the continuing effects of decreased agricultural subsidies by the Armenian government (per WTO requirements).[22]

    Foreign aid

    United States

    The Armenian government receives foreign aid from the government of the United States through the United States Agency for International Development and the Millennium Challenge Corporation.

    On March 27, 2006, the Millennium Challenge Corporation signed a five-year, $235.65 million compact with the Government of Armenia. The single stated goal of the "Armenian Compact" is "the reduction of rural poverty through a sustainable increase in the economic performance of the agricultural sector." The compact includes a $67 million to rehabilitate up to 943 kilometers of rural roads, more than a third of Armenia's proposed "Lifeline road network". The Compact also includes a $146 million project to increase the productivity of approximately 250,000 farm households through improved water supply, higher yields, higher-value crops, and a more competitive agricultural sector.[53]

    In 2010, the volume of US assistance to Armenia remained near 2009 levels; however, longer-term decline continued. The original Millennium Challenge Account commitment for $235 million had been reduced to about $175 million due to Armenia’s poor governance record. Thus, the MCC would not complete road construction. Instead, the irrigated agriculture project was headed for completion with apparently no prospects for extension beyond 2011.[22]

    European Union

    With curtailment of the MCC funding, the European Union may replace the US as Armenia’s chief source of foreign aid for the first time since independence. From 2011 to 2013, the European Union is expected to advance at least €157.3 million ($208 million) in aid to Armenia.[22]

    External trade


    2009 export percentages

    In 2010, Armenia’s exports remained resource-dependent, largely because the non-resource-intensive sectors were significantly less competitive. Armenia has not succeeded in increasing and diversifying exports beyond raw materials thus leaving room for a greater vulnerability to external shocks.[22] There was a 43.9 percent increase in overall exports during the January to September period. The main three export destinations were Bulgaria with 15.2 percent of total exports, followed by Germany with 14.2 percent and Russia with 13.9 percent. Raw minerals were the main export sent to Bulgaria and Germany.[22]


    The global economic crisis has had less impact on imports because the sector is more diversified than exports. In the first nine months of 2010, imports grew about 19 percent, just about equal to the decline of the same sector in 2009.[22]


    During the first half of 2008, Armenia's widening current-account trade deficit grew by 66 percent to $1.39 billion USD, with a 40 percent rise in imports. Furthermore, Armenian exports fell by about one percent to $520 million USD.[46]

    According to the National Statistical Service, Armenia's trade deficit in 2006 was $1.2 billion with growth in exports being largely flat.[54] During the first 11 months of 2006, net imports grew by 21 percent to $1.95 billion, while exports stood at $895 million, up 0.3 percent from the same period in 2005.[55]


    European Union

    In 2010, EU countries accounted for 32.1 percent of Armenia’s foreign trade.[22] Germany is Armenia’s largest trading partner among EU member states, accounting for 7.2 percent of trade; this is due largely to mining exports. Armenian exports to EU countries have skyrocketed by 65.9 percent, making up more than half of all 2010 January to September exports. Imports from EU countries increased by 17.1 percent, constituting 22.5 percent of all imports.[22]

    During January–February 2007, Armenia’s trade with the European Union totaled $200 million.[54] During the first 11 months of 2006, the European Union remained Armenia's largest trading partner, accounting for 34.4 percent of its $2.85 billion commercial exchange during the 11-month period.[55]

    Russia and former Soviet republics

    Bilateral trade with Russia stood at more than $700 million for the first nine months of 2010 – on track to rebound to $1 billion mark first reached in 2008 prior to the global economic crisis.[22]

    During January–February 2007, Armenia’s trade with Russia and other former Soviet republics was $205.6 million (double the amount from the same period the previous year), making them the country’s number one trading partner.[54] During the first 11 months of 2006, the volume of Armenia’s trade with Russia was $376.8 million or 13.2 percent of the total commercial exchange.[55]


    As of early 2011, trade with China is dominated by imports of Chinese goods and accounts for about 10 percent of Armenia's foreign trade.[56] The volume of Chinese-Armenian trade soared by 55 percent to $390 million in January–November 2010. Armenian exports to China, though still modest in absolute terms, nearly doubled in that period.[56]


    In 2010, the volume of bilateral trade with Iran was $200 million - which is approximately equal to the trade between Armenia and Turkey.[22] The number of Iranian tourists has risen in recent years, with an estimated 80,000 Iranian tourists in 2010.[22]


    In 2010, the volume of bilateral trade with Turkey was about $200 million, with trade taking place without open borders, across Georgian territory.[22] This figure is not expected to increase significantly so long as the land border between the Armenia and Turkey remains closed.[22]

    United States

    From January–September 2010, bilateral trade with the United States measured approximately $150 million, on track for about a 30 percent increase over 2009.[22] An increase in Armenia’s exports to the US in 2009 and 2010 has been due to shipments of aluminum foil.[22]

    During the first 11 months of 2006, U.S.-Armenian trade totaled $152.6 million.[55]


    The volume of Georgian-Armenian trade remains modest in both relative and absolute terms. According to official Armenian statistics, it rose by 11 percent to $91.6 million in January–November 2010. The figure was equivalent to just over 2 percent of Armenia’s overall foreign trade.[57]

    Foreign debt

    Armenia's national debt has increased significantly since 2008 when public external debt consisted of only 13.5 percent of GDP.[22] By the end of 2010, Armenia’s external debt is projected to form about 42 percent of GDP, and 50 percent in 2012.[22]

    As of late November 2009, the Armenian government's foreign debt was around $3 billion USD, having doubled in size over the course of the previous year.[27] With the Armenian government needing more anti-crisis loans from the World Bank and other foreign donors, the debt-to-GDP ratio is expected to exceed 40 percent in 2010.[27] According to a World Bank official, a country that has around 12 percent rate of growth or even lower, at the range of 7 to 8 percent, can afford a level of public debt of up to 50 percent. The official warned that the debt servicing payments of the Armenian government will surge by 2013 and absorb "quite significant part of tax revenues."[27]

    According to another estimate, the ratio between the country's Gross Domestic Product (GDP) and the state's foreign debt has reached 46 percent.[58] Economists generally agree that a country is insolvent, if its foreign debt surpasses 50 percent of its GDP.[58] Critics of the government say that the $500 million credit from Russia should have gone to develop industry, instead of going to the construction sector.[58]

    Transportation routes and energy lines


    Since early 2008, Armenia's entire rail network is managed by the Russian state railway.[59][60]

    Through Georgia

    Russian natural gas reaches Armenia via a pipeline through Georgia.

    The only operational rail link into Armenia is from

    • Armenia Economic Development at DMOZ
    • Ministry of Economy
    • Fund for Rural Economic Development
    • Armenian Development Agency

    External links



    1. ^ a b [1], Factbook
    2. ^
    3. ^ a b c d e f g h i j [2], The World Factbook, United States Central Intelligence Agency
    4. ^ [3], IMF
    5. ^
    6. ^
    7. ^
    8. ^
    9. ^
    10. ^
    11. ^ a b c Curtis 1995, p. 42.
    12. ^ Curtis 1995, p. 42–43.
    13. ^ Curtis 1995, p. 43.
    14. ^ Curtis 1995, p. 41.
    15. ^ Curtis 1995, p. 48–50.
    16. ^ a b c Curtis 1995, p. 50.
    17. ^ Curtis 1995, p. 50–51.
    18. ^ "2007-2008 Global Competitiveness Index rankings and 2006–2007 comparisons", World Economic Forum.
    19. ^ "The Global Competitiveness Report 2012-2013", World Economic Forum.
    20. ^ "2012 Index of Economic Freedom", The Heritage Foundation.
    21. ^ "Doing Business 2013", International Finance Corporation.
    22. ^ a b c d e f g h i j k l m n o p q r s t u v w x y z aa ab ac ad ae af ag ah ai aj ak al
    23. ^ Press Review, Armenia Liberty (RFE/RL), February 26, 2009.
    24. ^ a b c Competitive Edge: The pitfalls of monopolies, and the challenges of a business-influenced parliament,, January 4, 2008.
    25. ^ Price Predictions: With present inflation at nearly triple expectation, economists challenge 2009 forecast,, November 14, 2008.
    26. ^ a b Armenia Warned To End ‘Oligopoly’, Armenia Liberty (RFE/RL)October 10, 2009.
    27. ^ a b c d e f "Armenia Learning From Crisis, Says World Bank ", Armenia Liberty (RFE/RL), November 27, 2009.
    28. ^ New Russian Gas Price For Armenia Unveiled, Armenia Liberty (RFE/RL), September 23, 2008.
    29. ^ Armenian Railway Under Anti-Trust Investigation, Armenia Liberty (RFE/RL), November 5, 2008.
    30. ^ Armenian Premier Downplays Impact Of Georgia War, Armenia Liberty (RFE/RL), August 28, 2008.
    31. ^ Armenian Cement Plant ‘Sold To Russian Firm’, Armenia Liberty (RFE/RL), August 15, 2008.
    32. ^ Press Review (quoting Zhamanak Yerevan), Armenia Liberty, March 19, 2007.
    33. ^ Armenia Airport Hamstrung By Mysterious Fuel Shortage, Armenia Liberty (RFE/RL), November 7, 2005.
    34. ^ Armenian Central Bank Approves Another Rate Rise, Armenia Liberty (RFE/RL), June 3, 2008.
    35. ^ Government Vows To Curb Rising Inflation, Armenia Liberty (RFE/RL), May 29, 2008.
    36. ^ Mining Giant Remains Armenia’s Top Taxpayer, Armenia Liberty (RFE/RL), January 29, 2008.
    37. ^ Armenia Hit By Sugar Shortage, Armenia Liberty (RFE/RL), October 23, 2007.
    38. ^ Editors Concerned About Sale Of Newspaper Distribution Firm, Armenia Liberty (RFE/RL), September 13, 2007.
    39. ^ French Mobile Giant Set To Win Armenia Tender, Armenia Liberty (RFE/RL), October 6, 2008.
    40. ^ Armenian Telecom Operator Fined $1 Mln, Armenia Liberty (RFE/RL), July 30, 2008.
    41. ^ Armenian Telecom Sector Further Liberalized, Armenia Liberty (RFE/RL), August 24, 2007.
    42. ^ CIA - The World Factbook
    43. ^ a b "ARMENIA: GAS PRICE HIKE POSES CHALLENGE FOR GOVERNMENT", EurasiaNet, April 24, 2008.
    44. ^ "2008 National Competitiveness Report of Armenia", Economy and Values Research Center, 2008.
    45. ^ a b c d "Armenian Growth Still In Double Digits", Armenia Liberty (RFE/RL), September 20, 2007.
    46. ^ a b c d "Cash Transfers To Armenia Jump To New High", Armenia Liberty (RFE/RL), August 5, 2008.
    47. ^ a b c d e "Survey Highlights Armenia’s Lingering Unemployment", Armenia Liberty (RFE/RL), February 9, 2006.
    48. ^ "Armenia To Cut Visa Fees In Bid To Boost Tourism", Armenia Liberty (RFE/RL), October 17, 2008.
    49. ^ a b c
    50. ^
    51. ^ "Government Downplays Economic Cost Of Russian Gas Price Hike", Armenia Liberty (RFE/RL), February 10, 2006.
    52. ^ "Kocharian Orders Tax Exemption For Armenian Farmers", Armenia Liberty (RFE/RL), August 8, 2006.
    53. ^ "Armenia and Millennium Challenge Corporation: Building a Dynamic Partnership for Poverty Reduction through Economic Growth", Millennium Challenge Corporation, March 27, 2006. Archived May 14, 2009 at the Wayback Machine
    54. ^ a b c "Armenia Keeps Up Robust Growth", Armenia Liberty (RFE/RL), March 30, 2007.
    55. ^ a b c d "Armenia Posts Record-High Trade Deficit", Armenia Liberty (RFE/RL), January 8, 2007.
    56. ^ a b c Chinese FM Visits Armenia, Urges Closer Ties, Armenia Liberty (RFE/RL), February 17, 2011.
    57. ^ Armenia, Georgia Agree On Joint Border Control, Armenia Liberty (RFE/RL), February 16, 2011.
    58. ^ a b c Change Needed in Distribution of Foreign Credits: Union chair says economic indexes "disturbing",, November 27, 2009.
    59. ^ a b c d "Armenia ‘Pressing Ahead’ With Iran Rail Link", Armenia Liberty (RFE/RL, October 14, 2008.
    60. ^ a b "Armenia Scrambles To Restore Vital Supplies Via Georgia", Armenia Liberty (RFE/RL), August 18, 2008.
    61. ^ a b c d "Russia, Georgia Agree To Reopen Border Gate", Armenia Liberty (RFE/RL), December 24, 2009.
    62. ^ "Average Wage In Armenia Rises To $210", ARMENPRESS, August 3, 2007.
    63. ^ "Mortgage Loans Beyond the Reach of the Middle Class", Hetq Online, July 28, 2008.
    64. ^ a b c d "Government Keeps Up Strong Growth In Tax Revenues", Armenia Liberty (RFE/RL), October 14, 2008.
    65. ^ a b "Untouched and Out of Touch: Armenia not affected by US crisis due to relative insignificance", ArmeniaNow, October 3, 2008.
    66. ^ a b c d Socor, Vladimir. "Armenia's Energy Sector, Other Industrial Assets Passing Under Russia's Control", IASPS Policy Briefings: Oil in Geostrategic Perspective, November 13, 2002.
    67. ^ a b c d Danielyan, Emil. RUSSIA TIGHTENS GRIP ON ARMENIA WITH DEBT AGREEMENTS, Eurasianet, May 7, 2003
    69. ^ a b Socor, Vladimir. "RUSSIA CEMENTS CONTROL OF ARMENIA’S ENERGY SYSTEM", Eurasia Daily Monitor, November 3, 2006. Archived September 13, 2007 at the Wayback Machine
    70. ^ (French) Gazprombank acquiert entièrement la banque arménienne Areximbank


    See also

    Natural gas - imports: 2.05 billion m3 (2007 est.)
    country comparison to the world: 44

    Natural gas - exports: 0 m3 (2007 est.)
    country comparison to the world: 201

    Natural gas - consumption: 2.05 billion m3 (2007 est.)
    country comparison to the world: 81

    Natural gas - production: 0 m3 (2007 est.)
    country comparison to the world: 207

    Oil - imports: 44,670 barrels per day (7,102 m3/d) (2005)
    country comparison to the world: 90

    Oil - exports: 0 barrels per day (0 m3/d) (2005)
    country comparison to the world: 207

    Oil - consumption: 41,090 barrels per day (6,533 m3/d) (2006 est.)
    country comparison to the world: 100

    Oil - production: 0 barrels per day (0 m3/d) (2005 est.)
    country comparison to the world: 208

    Electricity - imports: 400.6 GWh; note - imports an unknown quantity from Iran (2007)

    Electricity - exports: 322.6 GWh; note - exports an unknown quantity to Nagorno-Karabakh (2007)

    Electricity - consumption: 4.539 GWh (2006)
    country comparison to the world: 109

    Electricity - production: 5.544 GWh (2007)
    country comparison to the world: 108


    Exchange rates: Armenian dram per US dollar - 310.00 (2008), 457.69 (2005), 533.45 (2004), 578.76 (2003), 573.35 (2002), 555.08 (2001), 539.53 (2000)

    Currency code: AMD

    Currency: dram (AMD)

    Value of stock exchange: $42.8 million (2005)

    Agriculture - products: Fruit (especially grapes and apricots), vegetables, livestock, wheat, wine, brandy

    Industries: Diamond processing, metal-cutting machine tools, forge-pressing machines, electric motors, tires, knitted wear, hosiery, shoes, silk fabric, chemicals, trucks, instruments, microelectronics, jewellery manufacturing, software development, food processing, brandy.

    3% (2008 est.)
    country comparison to the world: 105

    Industrial production growth rate:


    [67] Finally, while Armenia is not the only ex-Soviet state that has incurred multimillion-dollar debts to Russia over the past decade, it is the only state to have so far given up such a large share of its economic infrastructure to Russia. For example, pro-Western

    Political observers say that Armenia's economic cooperation with Russia has been one of the least transparent areas of the Armenian government’s work. The debt arrangements have been personally negotiated by (then) Defense Minister (and now President) Serge Sarkisian, Kocharian’s closest political associate. Other top government officials, including Prime Minister Andranik Markarian, had little say on the issue. Furthermore, all of the controversial agreements have been announced after Sarkisian’s frequent trips to Moscow, without prior public discussion.[67]

    Critics of the Kocharian government say that the Armenian administration never considered alternative ways of settling the Russian debts. According to economist Eduard Aghajanov, Armenia could have repaid them with low-interest loans from other, presumably Western sources, or with some of its hard currency reserves which then totaled about $450 million. Furthermore, Aghajanov points to the Armenian government's failure to eliminate widespread corruption and mismanagement in the energy sector – abuses that cost Armenia at least $50 million in losses each year, according to one estimate.[67]

    Controversy over non-transparent deals

    In October 2008 the Russian bank Gazprombank, the banking arm of Gazprom, acquired 100 percent of Armenian bank Areximbank after previously buying 80 percent of said bank in November 2007 and 94.15 percent in July of the same year.[70]

    On November 1, 2006, the Armenian government handed de facto control of the Iran-Armenia gas pipeline to Russian company Gazprom and increased Gazprom's stake in the Russian-Armenian company ArmRosGazprom from 45% to 58% by approving an additional issue of shares worth $119 million.[69] This left the Armenian government with a 32% stake in ArmRosGazprom. The transaction will also help finance ArmRosGazprom's acquisition of the Hrazdan electricity generating plant’s fifth power bloc (Hrazdan-5), the leading unit in the country.[69]

    In January 2003, the Armenian government and United Company RUSAL signed an investment cooperation agreement, under which United Company RUSAL (which already owned a 76% stake) acquired the Armenian government's remaining 26% share of RUSAL ARMENAL aluminum foil mill, giving RUSAL 100% ownership of RUSAL ARMENAL.[66][68]

    • Armenia's largest thermal power plant which is in the town of Hrazdan and is gas-burning
    • the Mars electronics and robotics plant in Yerevan, a Soviet-era flagship for both civilian and military production
    • three research-and-production enterprises—for mathematical machines, for the study of materials, and for automated control equipment—these being Soviet-era military-industrial plants

    On November 5, 2002, Armenia transferred control of 5 state enterprises to Russia in an assets-for-debts transaction which settled $100 million of Armenian state debts to Russia. The document was signed for Russia by Prime Minister Mikhail Kasyanov and Industry Minister Ilya Klebanov, while Prime Minister Andranik Markarian and National Security Council Secretary Serge Sarkisian signed for Armenia.[66] The five enterprises which passed to 100 percent Russian state ownership are:

    In September 2002, the Armenian government handed over Armenia’s largest cement factory to the Russian ITERA gas exporter in payment for its $10 million debt for past gas deliveries.[67]

    In August 2002, the Armenian government sold an 80 percent stake in the Armenian Electricity Network (AEN) to Midland Resources, a British offshore-registered firm which is said to have close Russian connections.[66]

    Since 2000, the Russian state has acquired several key assets in the energy sector and Soviet-era industrial plants. Property-for-debt or equity-for-debt swaps (acquiring ownership by simply writing off the Armenian government's debts to Russia) are usually the method of acquiring assets. The failure of market reforms, clan-based economics, and official corruption in Armenia have allowed the success of this process.[66]

    Takeover of Armenian industrial property by the Russian state and Russian companies

    Armenian banking assets are very low and make up only 25 percent of the Gross Domestic Product (GDP).[65]

    Armenia's financial system is not integrated into the global network. According to the head of the Armenian Central Bank’s (CBA) department for financial system policies and analyses (Vahe Vardanyan) Armenian banks have no large asset concentrations in foreign markets, particularly in capital markets. They nearly have no purchased securities (so-called securitized packages). For this reason, Armenia was virtually unaffected by the Liquidity crisis of September 2008.[65]



    Armenia is trying to "address its environmental problems". It has established a Ministry of Environment and has introduced a pollution fee system by which taxes are levied on air and water emissions and solid waste disposal.The resulting revenues are used for unknown purposes. Armenia doesn't seem to be interested in cooperating with other members of the Commonwealth of Independent States (a group of 12 former Soviet republics) or with members of the international community on environmental issues. The Armenian Government is working toward closing the Armenian Nuclear Power Plant and has already made an agreement with Russian "businessmen" about the construction and operation and ownage of a new Nuclear power plant.

    Environmental issues

    Many Armenian companies, especially those owned by government-connected tycoons, have long reported suspiciously low earnings, thereby avoiding paying larger taxes.[64]

    Tax evasion

    Over half of the tax revenues in the January–August 2008 time period were generated from value-added taxes (VAT). By comparison, corporate profit tax generated less than 16 percent of the revenues.[64] This suggests that tax collection in Armenia is improving at the expense of ordinary citizens, rather than wealthy citizens (who have been the main beneficiaries of Armenia's double-digit economic growth in recent years).[64]

    New value-added tax

    Many large companies have a privileged status when it comes to taxation. Big business is not taxed in proportion to its capacity and output, and the disproportionate burden falls on small and medium size businesses.[22]

    The Armenian government collected 383.5 billion drams ($1.26 billion) in various taxes in the first nine months of 2008 (a 33.2 percent increase from the same period last year).[64]

    Government revenue and taxation

    The AMD/USD exchange rate depreciated by 6.1 percent in the first three quarters of 2010 compared to the same period in 2009, before it began to show the expected end-of-the-year appreciation. In comparison, between the January to October periods of 2010 and 2009, depreciation stands at 4.7 percent.[22]

    In 2010, the value of the Armenian Dram (AMD) was artificially kept high during the height of the global economic crisis. Had the AMD been allowed to depreciate to its market level, exports would have become more competitive and the purchasing power of the majority of the population who are dependent on remittances from abroad would have increased. Instead, the value of the AMD was kept high, out of a fear of inflation and concern about alienating the powerful government-connected importers of oil, sugar, flour, cigarettes and beverages.[22]

    Appreciation and depreciation of the dram

    According to an OSCE survey, a typical Armenian migrant worker is a married man aged between 41 and 50 years who "began looking for work abroad at the age of 32-33."[47]

    Since gaining independence in 1991, hundreds of thousands of Armenia's residents have gone abroad, mainly to Russia, in search of work. Unemployment has been the major cause of this massive labor emigration. OSCE experts estimate that between 116,000 and 147,000 people left Armenia for economic reasons between 2002 and 2004, with two-thirds of them returning home by February 2005. According to estimates by the National Statistical Survey, the rate of labor emigration was twice as higher in 2001 and 2002.[47]

    Migrant workers

    [47] A 2003 household survey conducted by the National Statistical Survey found that the real unemployment rate is about 33 percent.[47] According to research commissioned by the Yerevan office of the


    As of April 24, 2008, the average monthly salary is 75,000 drams (about $242 US dollars).[43] According to the ROA National Statistical Service, the average monthly salary during January - June 2008 is 86,850 drams (about $287 at the time). About 62% of officially registered wage earners earn at least the average monthly wage, while only 19.6% receive a monthly salary of over 100,000 drams (about $330 at the time).[63]

    According to the state-owned Armenpress news agency, the average monthly wage in Armenia for the first half of 2007 was 70,700 drams (about $210 USD).[62]

    Monthly wages

    Armenia labor force by occupation (2006 est.)


    As of October 2008, the Armenian government is considering implementing an ambitious project to build a railway to Iran.[59] The 400 kilometer railway would pass through Armenia's mountainous southern province of Syunik, which borders Iran. Economic analysts say that the project would cost at least $1 billion (equivalent to about 40 percent of Armenia's 2008 state budget).[59] As of 2010, the project has been continuously delayed, with the rail link estimated to cost as much as $4 billion and stretch 313 km (194 mi).[22] In June 2010, Transport Minister Manuk Vartanian revealed that Yerevan is seeking as much as $1 billion in loans from China to finance the railway’s construction.[56]

    A new gas pipeline to Iran has been completed, and a road to Iran through the southern city of Meghri allows trade with that country. An oil pipeline to pump Iranian oil products is also in the planning stages.

    Through Iran

    In 2010, it was confirmed that Turkey will keep the border closed for the foreseeable future after the Turkey-Armenia normalization process collapsed.[22]

    An economic blockade with Turkey and Azerbaijan has cut Armenia's rail link between Gyumri and Kars to Turkey; the rail link with Iran through the Azeri exclave of Nakhichevan; and a natural gas and oil pipeline line with Azerbaijan. Also non-functioning are roads with Turkey and Azerbaijan. Despite the economic blockade of Turkey on Armenia, every day dozens of Turkish trucks laden with goods enter Armenia through Georgia.

    Through Turkey and Azerbaijan

    [61] This crossing is expected to reopen starting on March 1, 2010.[61] The Upper Lars border crossing (at

    Armenia's main rail and road border-crossing with Georgia (at ) is along the Sadakhlo.

    [60] The Georgian Black Sea ports of


Major monopolies in Armenia include:

In October 2009, when visiting Yerevan, the World Bank’s managing director, Ngozi Okonjo-Iweala, warned that Armenia will not reach a higher level of development unless its leadership changes the "oligopolistic" structure of the national economy, bolsters the rule of law and shows "zero tolerance" towards corruption.[26] "I think you can only go so far with this economic model," Ngozi Okonjo-Iweala told a news conference in Yerevan. "Armenia is a lower middle-income country. If it wants to become a high-income or upper middle-income country, it can not do so with this kind of economic structure. That is clear." She also called for a sweeping reform of tax and customs administration, the creation of a "strong and independent judicial system" as well as a tough fight against government corruption.[26] The warning was echoed by the International Monetary Fund.[27]

In early 2008, the State Commission for the Protection of Economic Competition named 60 companies having "dominant positions" in Armenia.[24]

According to the estimate of a former prime minister, Hrant Bagratian, 55 percent of Armenia's GDP is controlled by 44 families.[24]

According to one analyst, Armenia's economic system is anticompetitive due to the structure of the economy being a type of "monopoly or oligopoly". "The result is the prices with us do not drop even if they do on international market, or they do quite belated and not to the size of the international market."[25]


Following the advice of economic advisors who cautioned Armenia's leadership against the consolidation of economic power in the hands of a few, in January 2001, the Government of Armenia established the State Commission for the Protection of Economic Competition. Its members cannot be dismissed by the government.[24]

According to Vahram Nercissiantz, President Serzh Sargsyan's chief economic adviser, "Businessmen holding state positions have turned into oligarchs who have avoided paying sufficient taxes by abusing their state positions, distorted markets with unequal conditions, breached the rules of competition, impeded or prevented small and medium-sized business’ entry into manufacturing and thereby sharply deepened social polarization in the republic.[23]

Despite pronouncements at the highest levels of government on the importance of free competition, Armenia is next to last in the effectiveness of its anti-monopoly policy according to the 2010 results of the World Economic Forum Global Competitiveness Report.[22]

Armenia's economy is competitive to a few extent with government-connected individuals enjoying de facto monopolies over the import and distribution of basic commodities and foodstuffs, and under-reporting revenue to avoid paying taxes.

Armenia ranks 32nd out of 185 economies according to the 2013 ease of doing business index .[21]

Armenian State Revenue Committee (housing both the Armenian Customs Service and the Armenian Tax Service) claimed to be corrupt.

Domestic business environment

Armenia ranks 39th out of 179 economies according to the 2012 Index of Economic Freedom. Armenia is ranked 19th freest among the 43 countries in the Europe region, putting it above the world and regional averages.[20]

Index of Economic Freedom

The Armenian economy's competitiveness is low and stagnating according to the Serbia and Pakistan).[18] Armenia ranks 82nd out of 144 economies according to the 2012-2013 Global Competitiveness Index.[19]

Global competitiveness

Armenia was admitted to the tariffs, quotas, and restrictions of foreign trade. Although privatisation had slowed because of catastrophic collapse of the economy, Prime Minister Hrant Bagratyan informed the United States officials in the fall of 1993 that plans had been made to embark on a renewed privatisation programme by the end of the year.[17]

A few Armenians living abroad made large-scale investments. Besides a toy factory and construction projects, diaspora Armenians built a cold storage plant (which in its first years had little produce to store) and established the American University of Armenia in Yerevan to teach the techniques necessary to run a market economy.[16]

In the first post-communist years, efforts to interest foreign investors in joint enterprises were only moderately successful because of the blockade and the energy shortage. Only in late 1993 was a department of foreign investment established in the Ministry of Economy, to spread information about Armenia's investment opportunities and improve the legal infrastructure for investment activity. A specific goal of this agency was creating a market for scientific and technical intellectual property.[16]


This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.

Copyright © World Library Foundation. All rights reserved. eBooks from Hawaii eBook Library are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.