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- GDP (PPP):
- $17.9 billion
- 4.4% growth
- 2.2% 5-year compound annual growth
- $5,384 per capita
- Inflation (CPI):
- FDI Inflow:
Armenia’s economic freedom score is 69.4, making its economy the 38th freest in the 2013 Index. Its overall score has increased by 0.6 point from last year, mainly reflecting the better management of public spending. Armenia is ranked 17th among the 43 countries in the Europe region, and its score puts it above the world and regional averages.
Considerable diversification of the economic base has increased economic dynamism in Armenia, and a decade of strong economic growth has reduced poverty and unemployment rates. Regulatory efficiency has been facilitated by a broad simplification of business procedures. Following expansionary fiscal policies in recent years, steps have been taken to limit the cost of government through more prudent public finance management.
Although Armenia performs relatively well in many categories of economic freedom, stronger foundations are needed in areas like judicial independence and government transparency. Despite progress in tackling corruption, particularly within the tax and customs administrations, the close relationships within political and business circles raise concerns about cronyism and undue influence by vested interests.
Armenia achieved independence from the Soviet Union in 1991. A cease-fire in its 24-year dispute with Azerbaijan over the Nagorno–Karabakh region has been in effect since 1994, but minor hostilities continue, and Armenia’s borders with Azerbaijan and Turkey remain closed. Serzh Sargsyan of the center-right Republican Party has been president since 2008. The Republican Party won 44.8 percent of the vote in the March 2012 parliamentary election. Armenia’s economy relies on manufacturing, services, remittances, and agriculture. After a brief downturn in 2009, growth returned in 2010. The eurozone financial crisis remains a drag on the economy. The government, which relies heavily on loans from the World Bank, the International Monetary Fund, the Asian Development Bank, and Russia, is running a moderate budget deficit.
Armenia lacks dependable enforcement of the rule of law. Its scores for property rights and freedom from corruption are well below world averages. The judicial system is still recovering from underdevelopment and corruption, legacies of the Soviet era that substantially impede the enforcement of contracts. Anti-corruption measures have not been enforced effectively. Protection of intellectual property rights is poor.
The top income and corporate tax rates are 20 percent. Other taxes include a value-added tax
(VAT) and excise taxes. The overall tax burden amounts to 20 percent of total domestic income. Government spending has moderated at 24.4 percent of total domestic output. The budget deficit has fallen to 2.7 percent of GDP, and public debt has been reduced to around 35 percent of GDP.
The regulatory framework is relatively efficient. The minimum capital requirement for starting a business has been eliminated, and bankruptcy procedures have been modernized. The non-salary cost of labor is moderate, but the informal labor market is sizable. State subsidies distort prices in sectors like public transportation, electricity, and gas. Inflationary pressures have increased due to the rising cost of grain from principal supplier Russia.