- GDP (PPP):
- $28.3 billion
- 7.5% growth
- 3.6% 5-year compound annual growth
- $9,456 per capita
- Inflation (CPI):
- FDI Inflow:
Armenia’s economic freedom score is 67.7, making its economy the 47th freest in the 2019 Index. Its overall score has decreased by 1.0 point, dragged down by a steep drop in fiscal health and lower scores on government integrity and judicial effectiveness. Armenia is ranked 24th among 44 countries in the Europe region, and its overall score is slightly below the regional norm but well above the world average.
Despite the previous government’s efforts to improve the business environment through tax reform, reduce corruption in the customs and tax administrations, and increase the transparency of procurement processes, Armenia’s geographic isolation, narrow export base, and pervasive monopolies in important business sectors make it particularly vulnerable to deteriorations in global commodity markets. Nevertheless, modest diversification has produced greater economic dynamism, and a decade of strong economic growth has reduced poverty and unemployment. Cronyism and influence peddling remain concerns, and progress in tackling corruption has been limited.
Armenia was a Soviet republic until independence in 1991. Protests against President Serzh Sargsyan’s attempt to name himself prime minister led to his ouster, and Armen Sarkissian was elected president in April 2018, with opposition leader Nikol Pashinyan elected prime minister. Armenia’s 25-year occupation of neighboring Azerbaijan’s Nagorno–Karabakh region and other territories remains one of post-Soviet Europe’s frozen conflicts. The economy relies on manufacturing, services, remittances, and agriculture. Russia is Armenia’s principal export market, and Armenia joined Russia’s Eurasian Economic Union in 2015. It also signed a Comprehensive and Enhanced Partnership Agreement with the European Union in 2017. The government relies heavily on loans from Russia and international financial institutions.
Armenian law protects secured interests in both personal and real property. The judiciary is slow and lacks efficiency, independence, and transparency. Judges often seek advice from higher courts, making decisions subject to influence by external factors. Corruption is pervasive, is not regularly prosecuted, and has been aggravated by Russia’s consolidation of its influence over Armenia’s economy and regional security.
The top individual income tax rate is 26 percent, and the top corporate tax rate is 20 percent. Other taxes include value-added and excise taxes. The overall tax burden equals 21.3 percent of total domestic income. Over the past three years, government spending has amounted to 26.4 percent of the country’s output (GDP), and budget deficits have averaged 5.1 percent of GDP. Public debt is equivalent to 53.5 percent of GDP.
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. Armenia’s rising government debt is forcing the government to tighten its fiscal policies and rein in subsidies.
The combined value of exports and imports is equal to 88.5 percent of GDP. The average applied tariff rate is 2.1 percent. As of June 30, 2018, according to the WTO, Armenia had nine nontariff measures in force. Bureaucratic barriers interfere with foreign and domestic investment. The banking sector accounts for over 90 percent of total financial-sector assets but still struggles to provide adequate long-term credit.