Economy of Armenia
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| Economy of Armenia | ||
|---|---|---|
| Currency | 1 Dram = 100 louma | |
| Fiscal year | Calendar year | |
| Trade organisations | CIS, WTO | |
| Statistics [1] | ||
| GDP ranking | 126th (2006) [2] | |
| GDPReal All GDP figures are "real" (after inflation) not nominal (before inflation) | $16.94 billion Purchasing Power Parity basis- GDPReal = $6.6 when caluculated through a direct exchange rate (2006) | |
| GDP growth | 13.4% (2006) | |
| GDP per capita | $5,700 (2006) | |
| GDP by sector | agriculture (17.7%), industry (42%), services (40.3%) (2006) | |
| Inflation | 2.9% (2006) | |
| Pop below poverty line | 34.6% (2004) | |
| Labour force | 1.2 million (2006) | |
| Labour force by occupation | services (30%), industry (25%), agriculture (45%) (2002) | |
| Unemployment | 7.4% (2006) | |
| Main industries | diamond-processing, metal-cutting machine tools, forging-pressing machines, electric motors, tires, knitted wear, hosiery, shoes, silk fabric, chemicals, trucks, instruments, microelectronics, jewelry manufacturing, software development, food processing, brandy | |
| Trading Partners [3] | ||
| Exports | $1.056 billion (2006) | |
| Main partners | Germany 15.6%, Netherlands 13.7%, Belgium 12.8%, Russia 12.2%, Israel 11.5%, US 11.2%, Georgia 4.8% (2005) | |
| Imports | $1.684 billion (2005) | |
| Main Partners | Russia 13.5%, Belgium 8%, Germany 7.8%, Ukraine 7%, Turkmenistan 6.3%, US 6.2%, Israel 5.8%, Iran 4.8%, Romania 4.2% (2005) | |
| Public finances [4] | ||
| External debt | $1.16 billion (2006) | |
| Revenues | $1.3 billion (2007) | |
| Expenditures | $1.6 billion (2007) | |
| Economic aid | $254 million (recipient) (2004) | |
Armenia is the second most densely populated of the former Soviet republics. It is between the Black Sea and the Caspian Sea, bordered on the north and east by Georgia and Azerbaijan and on the south and west by Iran and Turkey.
Until independence, Armenia's economy was based largely on industry--chemicals, electronic products, machinery, processed food, synthetic rubber, and textiles--and 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 (for its one nuclear power plant) from Russia; 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 1988 earthquake, which killed more than 25,000 people and made 500,000 homeless, are still being felt. Although a cease-fire has held since 1994, the conflict with Azerbaijan over Nagorno-Karabakh has not been resolved. The consequent blockade along both the Azerbaijani and Turkish borders has devastated the economy, because of Armenia's dependence on outside supplies of energy and most raw materials. Land routes through Azerbaijan and Turkey are closed; routes through Georgia and Iran are inadequate or unreliable. In 1992-93, GDP fell nearly 60% from its 1989 level. The national currency, the dram, suffered hyperinflation for the first few years after its introduction in 1993.
Nevertheless, the Government of Armenia, helped by the cease-fire that has been in effect in Nagorno-Karabakh since 1994, has been able to carry out wideranging economic reforms which paid off in dramatically lower inflation and steady growth. Armenia has registered strong economic growth since 1995, building on the turnaround that began the previous year, and inflation has been negligible for the past several years. New sectors, such as precious stone processing and jewelry making, information and communication technology, and even tourism are beginning to supplement more traditional sectors such as agriculture in the economy.
This steady economic progress has earned Armenia increasing support from international institutions. The IMF, World Bank, EBRD, as well as other 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, improve the investment climate, and accelerate the privatization process. 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 WTO in January 2003. Armenia also has managed to slash inflation, stabilize its currency, and privatize most small- and medium-sized enterprises. Armenia's unemployment rate, however, remains high, despite strong economic growth. The chronic energy shortages Armenia suffered in the early and mid-1990s have been offset by the energy supplied by one of its nuclear power plants at 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 will be 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%.
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[edit] Overview
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, 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.
[edit] History of the modern Armenian economy
Armenia emerged from the umbra of the former Soviet Union in 1991 and migrated from a centrally planned economy (Communist system) to a market economy (capitalist system). Both the nation and the economy are nascent. Regional conflict retards economic growth. In addition, the border with Turkey is closed, making access to sea ports difficult and transportation logistics challenging to a country largely dependent upon imports. In 2003, Armenia became a member of the WTO (World Trade Organization). The nation is making substantial progress in privatizing ownership of what used to be State Owned industries under the former Soviet system. Despite marked progress, Armenia still suffers from a large trade imballance and is still largely dependent upon foreign aid and remittances from Armenian nationals working abroad, and members of the diaspora donating aid through NGOs (non-governmental organizations) such as the church. There are some foreign capital inflows, but no robust foreign investment. Despite progress since the Soviet era, the unemployment rate still hovers near 30% and there remains a huge gulf between actual and potential Gross Domestic Product.
[edit] GDP
The Gross Domestic Product of Armenia is estimated in 2006 to be 6.6 billion US dollars per calendar year and the GDP per capita (purchasing power parity) is estimated at $5400 US. The growth rate is high at 13.4%, but the relatively low base must be considered. Low inflation is maintained around 2.6% annually. Source: CIA Factbook
[edit] Environmental Issues
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, with the resulting revenues used for environmental protection activities. Armenia is interested in cooperating with other members of the Commonwealth of Independent States (a group of 12 former Soviet republics) and with members of the international community on environmental issues. The Armenian Government is working toward closing the Armenian Nuclear Power Plant as soon as alternate energy sources can be identified.
[edit] Other Statistics
Investment (gross fixed): 19.8% of GDP (2004)
Household income or consumption by percentage share:
lowest 10%: 2.3%
highest 10%: 46.2% (1999)
Distribution of family income - Gini index: 44.4 (1996)
Agriculture - products: fruit (especially grapes and apricots), vegetables, livestock, Wine, Brandy
Industrial production growth rate: 15% (2002 est.)
Electricity - production: 6,492 GWh (2002)
Electricity - consumption: 5,797 GWh (2002)
Electricity - exports: 704 GWh; note - exports an unknown quantity to Georgia; includes exports to Nagorno-Karabakh (2002)
Electricity - imports: 463 GWh; note - imports an unknown quantity from Iran (2002)
Oil - production: 0 barrel/day (2001 est.)
Oil - consumption: 5,700 barrel/day (2001 est.)
Oil - exports: NA (2001)
Oil - imports: NA (2001)
Natural gas - production: 0 m³ (2001 est.)
Natural gas - consumption: 1.4 billion m³ (2001 est.)
Natural gas - exports: 0 m³ (2001 est.)
Natural gas - imports: 1.4 billion m³ (2001 est.)
Current account balance: $-240.4 million (2004)
Exports - commodities: cut diamonds, mineral products, foodstuffs, energy
Imports - commodities: natural gas, petroleum, tobacco products, foodstuffs, uncut diamonds
Reserves of foreign exchange & gold: $754.9 million (2005)
Debt - external: $1.819 billion (2005)
Currency: dram (AMD)
Currency code: AMD
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)
[edit] References
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