The Eurasia Center
4927 Massachusetts Ave. NW
Washington, DC 20016
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President@Eurasiacenter.org
The Republic of Armenia
Country Report
Moving Toward Economic Stability and Growth:
As with all former Soviet republics, Armenia suffered widespread economic instability after the
implosion of the Soviet Union in 1991, which, in the particular case of Armenia, was
compounded by an eruption of violence with neighboring Azerbaijan in 1988 over the ethnically
Armenian enclave of Nagorno-Karabakh and a massive earthquake that devastated the industrial
sector. Consequently, Armenia was forced to adopt an economy oriented more towards small
agriculture and the development of new sectors, such as stone processing, jewelry making, and
telecommunication technology.
Armenia’s economy has suffered severely from the closure of trade borders with Azerbaijan and
Turkey, leaving only unreliable trade routes through Georgia and Iran, but Armenia’s severe
trade imbalance has been somewhat offset by direct foreign investment and aid from Armenians
abroad. Because of this tremendous amount of aid, Armenia might be expected to align itself
with the current Western embargo on Iran. 1
Armenia suffers from high unemployment and a staggering level of poverty (34.1% in 2009,
though this is a marked improvement considering the 2001 estimate of 55%)2, despite a stable
currency (the dram). Additionally, GDP growth has been steady, barring the disruption of several
major political incidents and reflecting the recent boom in agriculture. The Armenian
government, though it battles a high level of corruption, is striving to improve customs relations
and trade.
“Armenia: Yerevan Wants to Open Up to Iran” (http://www.eurasianet.org/node/64910)
The Armenian Weekly “New Report on Armenia Poverty Rate Worries UNICEF”
(http://www.armenianweekly.com/2011/01/06/new-report-on-armenia-poverty-rate-worries-unicef/)
1
2
Economic Indicators:
• Armenia maintains a GDP (PPP) of a little over $24.26 billion and a per capita GDP (PPP) of
$7,400.3
• The economy grew by 3.2% in 2014, down from 7.1% in 2012 and a large drop from over 13%
only a few years prior.4
• As of 2014, Armenia’s inflation rate is 3%, while unemployment is 17.6%.5
• Armenia’s steady economic progress has earned it considerable grants and loans from
international institutions, such as the International Monetary Fund, World Bank, European
Bank for Reconstruction and Development, with loans since 1993 totaling $1.1 billion. The
United States has also been a significant investor in Armenian development, with over $37
million dollars in 2013 to support economic, health, and educational programs.6
• Armenia offers one of the most stable environments within its region for potential businesses,
requiring far fewer procedures, time, cost, and minimum capital to start a business than the
regional average. Also, Armenia successfully distributes licenses, employs workers, and
registers properties.7
• In January 2015, Russia welcomed Armenia onto the Eurasian Economic Union, however the
steep depreciation of the ruble caused inflation, currency fluctuation, and significantly less
Armenian exports to Russia.3
Economic Structure:
• GDP per sector: 21.9% agriculture, 31.5% industry, and 46.6% services.8
• The extreme shift from industry to agriculture since 2006 as a result of the tense political
situation regarding the presidential election campaign and the post-election civil unrest in
2008. Market saturation, a drop in demand related to the global economic crisis, and a steep
decline in foreign remittances contributed to the further slowdown.9
• Growth sectors in the Armenian economy include telecommunications, the assembly of electric
and electronic appliances, agriculture and food processing, energy generation and distribution,
construction, coal and gold mining, and international air communications.
• Armenia exports $1.75 billion (2014 est.) in goods each year: pig iron, unwrought copper,
nonferrous metals, diamonds, mineral products, foodstuffs, energy. Export partners (2013)-Russia 22.6%, Bulgaria 10.3%, Belgium 8.9%, Iran 6.5%, US 6%, Canada 5.9%, Georgia
5.8%, Germany 5.8%, China 4.7%, Netherlands 4.5%10
Political Considerations:
• Armenia has been a republic since 1991 when it held a referendum declaring its independence
from the Soviet Union, followed soon afterward by presidential elections. Armenians directly
The CIA World Factbook: “Armenia” (https://www.cia.gov/library/publications/the-worldfactbook/geos/am.html#top)
4 Ibid.
5 Ibid.
6 US Department of State - “Background Notes: Armenia” (http://www.state.gov/r/pa/ei/bgn/5275.htm)
7 The World Bank Group – “Doing Business in Armenia”
(http://www.doingbusiness.org/ExploreEconomies/?economyid=10)
8 The CIA World Factbook: “Armenia”
9 US Department of State - “Background Notes: Armenia”
10 Ibid.
3
elect their president every five years, and the president may serve no more than two
consecutive terms.11
• Serzh Sargsyan was elected President of the Republic of Armenia on February 19, 2008, and
was reelected in February 2013.12 Armenia’s 2005 constitution13 has increased the power of the
legislative branch and allows for more independence of the judiciary in an effort to adopt a
Western model of liberal government and the rule of law, although the executive power still
remains more powerful than in Western European countries.14
• The human rights record of the Government of Armenia is considered to be fairly poor, with
beatings of pretrial detainees, arbitrary arrests and detentions, limits on press freedom, and
restrictions on freedom of religion, though the state of human rights has recently improved.
Attractions:
Economic Stability:
Since achieving independence from the Soviet Union in 1991, the Government of Armenia has
embarked on an IMF-sponsored program for macroeconomic stability which has been, by and
large, very successful. The dram has been stabilized to an inflation rate of 3.2%, unemployment
is relatively high, at 15.9% in both 2014 and 2013. Armenia has seen a signifigant shift in its
economy in recent years from the agrictultural sector to the industrial sector.15
An Emerging Market Economy:
Since the adoption of the constitution of 2005 and the improvement of the political climate in
which it has resulted, Armenia has been steadily moving towards a market economy. The U.S.
Agency for International Development has been particularly instrumental in this regard,
implementing a program focusing on the development of a private sector, energy sector reform,
good governance programs, social sector reform, and health sector reform.
A Skilled Workforce:
What Armenia lacks in natural resources, it makes up for with its skilled workforce. Historically,
Armenia has always been notable for its craftsmen and artisans, and, since Armenia has had to
develop new sectors of its economy since the dissolution of the Soviet Union.16
Troubled Spots:
Disputes with Azerbaijan:
Armenia has had a long-standing dispute with Azerbaijan regarding the status of the ethnically
Armenian region of Nagorno-Karabakh, whose secession is supported by the Government of
Armenia, demonstrated by militant occupation. The two countries are still technically at war
since 1988, with border clashes erupting sporadically and several failed peace talks.
Encarta: “Armenia” (http://encarta.msn.com/encyclopedia_761569919_5/Armenia_(country).html#s45)
The Official Site of the President of the Republic of Armenia
(http://www.president.am/president/biography/eng/)
13 The Government of the Public of Armenia (http://www.gov.am/en/official/)
14 US Department of State - “Background Notes: Armenia”
15 The Encyclopedia of Nations: Armenia (http://www.nationsencyclopedia.com/Europe/Armenia.html)
16 US Department of State - “Background Notes: Armenia”
11
12
Energy Shortages:
Armenia is highly dependent on importing fuels for energy, mainly from Russia. The Armenia
Nuclear Power Plant (ANPP) at Metsamor supplies around 40% of electricity generation for the
country while hydro and thermal plants each supply about 30%. Armenia imports most of its
natural gas from Russia, which provided significant discounts to Armenia until 2009. Russian
import gas prices rose 40% in April 2009 and rose to an overall increase of 63.6% in April 2010.
Despite this, the current price ($180) is still below the international average of over $300.17 And,
a pipeline that delivers natural gas from Iran to Armenia was completed in December 2008; gas
deliveries are expected to since the completion of the Yerevan Thermal Power Plant in April
2010.18 In 2015, Armenia became an official member of the Eurasian Economic Union (EAEU),
which has drawn it into closer cooperation with its member states, especially Russia.
Corruption:
Repercussions of the Soviet era obstruct the enforcements of contracts.19 Armenia is struggling
to eradicate corruptive behavior, battling unequal tax and property rights, customs and regulatory
rules, and a weak judicial system. Now, Armenia’s fight against corruption has exposed highranking officials, and they have been dismissed upon being charged of bribery and corruption.
Armenia has also made efforts to make their government more transparent and reduce
bureaucracy.20
Environmental Issues:
Armenia is making huge strides to improve the environment despite its many challenges. It
suffers from oil pollution, pollution of Hrazdan (Razdan) and Aras Rivers, and mass
deforestation after the energy crisis of the 1990s. The nation's soil has also been polluted by
chemicals including DDT. Sevana Lich (Lake Sevan) was being drained for hydropower and the
decreased water level threatened the lake’s source as drinking water. Efforts to reverse the
drainage have been succesful however, with th Vorotan tunnel diverting water from the Vorotan
river. Since 2012, the water level of the lake has risen 380 cm.21 The Metsamor nuclear power
plant is restarting in a seismically active zone, and does not meet the safety requirements by the
IAEA.2223 But, the Nairit Chemical Plant, the Alaverdy Metallurgical Plant, and the Vanadzor
Chemical Combine among other industrial centers have been closed to curtail pollution.24
Demographics:
Armenia’s population has decreased from 3.2754 million (as of 2012) to 3.0106 million as of
2015, with 62.8% of the population living in urban. Armenian is the official language; life
expectancy is 74 years; and Christianity is the official religion with St. Etchmiadzin, the
US Department of State - “Background Notes: Armenia”
The CIA World Factbook: “Armenia”
19 2012 Index of Economic Freedom (http://www.heritage.org/index/country/armenia)
20 Trust Law (http://www.trust.org/trustlaw/country-profiles/good-governance.dot?id=df27782a-e847-4ccc94a4-c09373d7a6ae)
17
18
21
22
Wikipedia, Lake Sevan (www.wikipedia.org/wiki/lake_sevan)
IndexMundi (http://www.indexmundi.com/armenia/environment_current_issues.html)
23 Encyclopedia of the Nations (http://www.nationsencyclopedia.com/Europe/ArmeniaENVIRONMENT.html#b)
24 Country Studies - Armenia (http://countrystudies.us/armenia/22.htm)
Cathedral of the Armenian Apostolic Church and the Residence of the Catholicos as the main
site of worship.Armenia is practically the only mono-ethnic country in the region. Ethnic
Armenians make up 96% of the population while Yezidis make up 1.1%, and Russians 0.5%.
Other ethnicities include Assyrians, Ukrainians, Greeks, Kurds, Georgians, and Belarusians.
And, Armenia has recently adopted a Demographic Policy Strategy in 2009 to 2035 (which can
be found at http://unfpa.am/sites/default/files/RA-Demography-Strategy-Eng.pdf). The program
outlines projects aimed at demographic development and population growth in Armenia.2526
Armenia's embassy is located at 2225 R Street, NW, Washington, DC, 20008; tel: 202-319-1976;
fax: 202-319-2982.
Acknowledgements:
Research: Sara Rosenblatt and Russell Osier, Research Associates, under the
supervision & coordination of Dr. Gerard Janco, President Eurasia Center/Eurasian
Business Coalition.
25
26
The Government of the Republic of Armenia (http://www.gov.am/en/demographics/)
Cultural Center of the East (http://ostarmenia.com/?page_id=7637#10)