2017 Index of Economic Freedom

Armenia

overall score70.3
world rank33
Rule of Law

Property Rights55.5

Government Integrity43.4

Judicial Effectiveness42.5

Government Size

Government Spending81.7

Tax Burden83.7

Fiscal Health82.9

Regulatory Efficiency

Business Freedom78.5

Labor Freedom72.4

Monetary Freedom72.8

Open Markets

Trade Freedom80.2

Investment Freedom80.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 3.3 million
  • GDP (PPP):
    • $25.3 billion
    • 3.0% growth
    • 4.3% 5-year compound annual growth
    • $8,468 per capita
  • Unemployment:
    • 16.3%
  • Inflation (CPI):
    • 3.7%
  • FDI Inflow:
    • $180.5 million
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Considerable diversification of Armenia’s economic base has increased economic dynamism, and a decade of strong economic growth has reduced poverty and unemployment rates. Broad simplification of business procedures has facilitated regulatory efficiency. After years of expansionary fiscal policies, efforts have been made to limit the cost of government through more prudent management of public finance.

Armenia performs relatively well in many categories of economic freedom, but more reforms are needed to enhance judicial independence and government transparency. Despite progress in tackling corruption, particularly in the tax and customs administrations, close relationships within political and business circles raise concerns about cronyism and undue influence.

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Background

President Serzh Sargsyan of the center-right Republican Party won a second five-year term in 2013. A cease-fire in Armenia’s 25-year occupation of Azerbaijan’s Nagorno–Karabakh region has been in effect since 1994, but four days of intensive fighting in April 2016 left dozens dead on both sides. The economy relies on manufacturing, services, remittances, and agriculture. Armenia announced that it was suspending an association agreement with the European Union in September 2013 and joined the Russian-backed Eurasian Economic Union in 2015. A sluggish Russian economy, which accounts for 23 percent of Armenian exports, has inhibited growth. The government relies heavily on loans from the World Bank, the International Monetary Fund, the Asian Development Bank, and Russia.

Rule of LawView Methodology

Property Rights 55.5 Create a Graph using this measurement

Government Integrity 43.4 Create a Graph using this measurement

Judicial Effectiveness 42.5 Create a Graph using this measurement

Armenian law protects secured interests in personal and real property. The judiciary lacks independence and transparency. All disputes involving contracts, ownership of property, or commercial matters are resolved in the courts of general jurisdiction, which handle both civil and criminal cases and have long backlogs. Pervasive corruption has been aggravated by Russia’s consolidation of its influence over Armenia’s economy and regional security.

Government SizeView Methodology

The top individual income tax rate is 26 percent, and the top corporate tax rate is 20 percent. Other taxes include a value-added tax and excise taxes. The overall tax burden equals 23.5 percent of total domestic income. Government spending has amounted to 24.7 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.8 percent of GDP. Public debt is equivalent to 46.6 percent of GDP.

Regulatory EfficiencyView Methodology

The regulatory framework is relatively efficient. The minimum capital requirement for business start-ups has been eliminated, and bankruptcy procedures have been modernized. The nonsalary cost of labor is moderate, but the informal labor market is sizable. The government and a Russian–Armenian billionaire jointly funded electricity subsidies for more than a year after massive public protests in June 2015 against a proposed rate increase.

Open MarketsView Methodology

Trade is important to Armenia’s economy; the value of exports and imports taken together equals 71 percent of GDP. The average applied tariff rate is 2.4 percent. Bureaucratic barriers interfere with international trade, and foreign citizens may not own land. The state no longer has a stake in any bank, but the banking sector, which accounts for over 90 percent of total financial-sector assets, still struggles to provide adequate long-term credit.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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