- GDP (PPP):
- $33.4 billion
- 7.6% growth
- 4.8% 5-year compound annual growth
- $14,220 per capita
- Inflation (CPI):
- FDI Inflow:
Armenia’s economic freedom score is 71.9, making its economy the 32nd freest in the 2021 Index. Its overall score has increased by 1.3 points, primarily because of an improvement in fiscal health. Armenia is ranked 18th among 45 countries in the Europe region, and its overall score is above the regional and world averages.
Economic freedom in Armenia has hovered between moderately free and mostly free for many years. GDP growth during the reporting period has continued to be strong. To institutionalize higher levels of economic freedom more firmly, the government needs to maintain its focus on improving judicial effectiveness and government integrity. Stronger rule of law would also have a positive impact on investment freedom.
IMPACT OF COVID-19: As of December 1, 2020, 2,193 deaths had been attributed to the pandemic in Armenia, and the economy was forecast to contract by 4.5 percent for the year.
Armenia was a Soviet republic until independence in 1991. In 2018, massive protests against corruption led to the election of a reform-minded government headed by Prime Minister Nikol Pashinyan with the support of a sizeable parliamentary majority. Nevertheless, corruption remains a persistent problem. Armenia’s decades-long occupation of parts of Azerbaijani territory ended after more than six weeks of heavy fighting in 2020 when both sides agreed to a Russian-backed peace plan. 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 property, both personal and real, and provides a basic framework for secured lending. Title registration is supported effectively. Courts face systemic political influence, and judicial institutions are undermined by corruption. 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 23 percent, and the top corporate tax rate is 18 percent. The overall tax burden equals 20.9 percent of total domestic income. Government spending has amounted to 25.0 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.5 percent of GDP. Public debt is equivalent to 53.4 percent of GDP.
Armenia has increased minority shareholder protections by increasing shareholders’ rights and shareholders’ say in corporate decisions. Transparency has been added to ownership and control structures. Value added per worker has improved. The government continues to subsidize electricity, and the IMF has found that lack of transparency in reporting public-sector spending may be masking the true extent of subsidies to other state-owned enterprises.
Armenia has 11 preferential trade agreements in force. The trade-weighted average tariff rate is 5.6 percent, and 10 nontariff measures are in effect. Foreign investment in various sectors remains regulated. The overall financial sector, not fully developed and subject to state control, is dominated by fairly well-capitalized banks. In the wake of the ongoing pandemic, no capital-control measures have been implemented.