Armenia takes off
| Author | Enrique Gelbard/Jimmy McHugh |
| Position | IMF Middle East and Central Asia Department |
| Pages | 201-207 |
Page 201
Over the past four years, Armenia's economic performance has outpaced that of its neighbors and other low-income countries. Sound policies and selected structural reforms have helped Armenia achieve double-digit growth, low inflation, and rapidly falling poverty. Continued strong performance, however, will require further reforms, notably steps to strengthen certain institutions, fight corruption, and improve corporate governance.
Page 206
Over the past four years, real GDP growth in Armenia has outpaced that of its neighbors and other low-income countries, averaging 12 percent a year (see chart). Also, since 2001, inflation has been low, at an annual average rate of 4 percent, and poverty and inequality have fallen rapidly. The government's sustained commitment to economic stability and reform, especially since 2001, has been a critical element in this progress. Armenia is now at a cusp-more reforms can spur further gains, but faltering could put them at risk.
Like many other constituent states of the former Soviet Union, Armenia experienced a major economic downturn after the Union's dissolution. Several early reforms, initiated in 1994-98, attempted to revitalize the economy. The reforms focused on privatizing land holdings and small-scale enterprises, and liberalizing prices, trade, and the foreign exchange regime.
These policies allowed a shift to market prices and incentives, setting the stage for a period of market-driven capital formation.
The economy rebounded in the second half of the 1990s, and annual inflation declined from triple to single-digit levels.
As the 1990s ended, however, it was clear that imbalances continued to constrain economic performance. Over 50 percent of the population still lived below the poverty line, and emigration continued. Armenia's fiscal position was weak and hampered by a continuous accumulation of internal and external payments arrears. The banking sector also saw the collapse of about onethird of the country's commercial banks. Lastly, corruption in state-owned energy and water companies generated large interenterprise arrears and a sizable quasi-fiscal deficit.
In the face of these concerns, the authorities launched a renewed stabilization and...
To continue reading
Request your trial