Armenia is still largely an agricultural
country, even though the government is investing in an
expansion of the service sector. The industry that was
set for military production during the Soviet era
(1920–1991) has been transformed, and today diamonds and
metals are the most important export products. However,
large parts of the economy have stagnated, while the IT
sector has grown over a number of years.
During the Soviet era, Armenia manufactured
industrial goods for other Soviet republics and received
fuel and raw materials from them. The system collapsed
when the Soviet Union disbanded in 1991. The Armenian
economy was already severely strained by a 1988
earthquake and conflict over Nagorno-Karabakh (see
Modern History). The earthquake claimed at least 25,000
lives and made half a million homeless. The conflict
over Nagorno-Karabakh caused large refugee flows, and in
its wake, Azerbaijan introduced a yet-ongoing economic
blockade in 1989, to which Turkey joined in 1993 as
Major imports by Armenia, covering a full list of top products imported by the country and trade value for each product category.
Independent Armenia immediately began to privatize
business, at first, smaller companies. Armenia was the
first of the Soviet republics to privatize agricultural
land. Prices were released on a number of goods, trade
abroad was liberalized and a new tax system was
introduced. But despite all the reforms, the economy
stagnated. The lack of an effective banking system and
investment protection laws deterred both foreign and
domestic investors. The bottom was reached during the
war years 1992–1993, when the gross domestic product
(GDP) was more than halved. Almost all industries stood
still because of fuel shortages. Heat was lacking in
homes, schools and hospitals. The government took out
large loans to cover the holes in the budget. In 1993,
the Armenians introduced their own currency, dram.
Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including ARM which represents the country of Armenia.
Turning point 1994
After a ceasefire in Nagorno-Karabakh in 1994, the
situation began to brighten and production increased.
The soaring inflation did not fall until the following
year, but then drastically. In 1995, a second phase of
privatization began, when large industrial companies
began to sell out. Many major Soviet industries were
closed for good, because no one wanted to buy their
products anymore. An economic reform program was started
in collaboration with the International Monetary Fund (IMF).
Privatizations have continued, but large companies have
not been as productive as one hoped.
After the turning point in 1994, GDP grew until 2008,
several years in a row by over 13 percent. But growth
benefited most groups in the cities, while many,
especially in the countryside, remained poor. Yet in
2012, almost one in three Armenians, according to
official data, lived below the poverty line.
Unemployment had then officially dropped to about 6
percent, but the figure is likely to hide a lot of
underemployment. Moreover, transfers from Armenians
working abroad, especially in Russia, make up a tenth of
the country's GDP.
The unresolved conflict over Nagorno-Karabakh is a
strain on the Armenian economy. Defense costs remain
high, and Armenia remains excluded from the role of
Caspian oil transit country. Keeping the regime in
Nagorno-Karabakh under arms costs large sums. At the
same time, however, both Armenia and Nagorno-Karabakh
receive generous assistance from exiled Armenians
abroad, primarily in the United States, and also from
the US state. Armenia is one of the countries in the
world that receives the most aid per inhabitant. A
prominent future venture is IT courses for teenagers.
The tumor project is financed by exile alarm menus based
in the USA.
Russia has also invested heavily in Armenia. Russian
influence continues to characterize all strategically
important sectors, such as energy and
Increased foreign debt
Through the large flow of money from exile Armenians,
Armenia initially hoped to be able to avoid the worst
effects of the world economic crisis that erupted in
2008. But the money transfers began. On March 3, 2009,
the Central Bank of Armenia gave up attempts to maintain
the value of the currency, dram, which fell freely and
lost 30 percent of its value in a single day. During the
year, GDP fell by almost 15 percent.
In early 2009, Armenia received promises from the
World Bank on loans of up to $ 800 million over four
years, mainly to develop rural infrastructure and
stimulate small and medium-sized businesses. Shortly
thereafter, a contract was signed with Russia for a loan
of $ 500 million and in 2010 the IMF received a sign of
a three-year loan of close to $ 400 million. The money
would be used to stabilize the economy, secure growth
and reduce poverty, among other things.
The external debt shot up after 2008 and has in
recent years corresponded to more than 50 percent of
GDP, dangerously close to the level at which the central
government may find it difficult to handle repayments on
the loans. Foreign debt has remained a concern, but the
economy has undergone some recovery in recent years.
Productivity, foreign investment and tourism have grown,
copper prices have risen and in 2017 the highest growth
rates were recorded since the pre-crisis 2008-2009.
According to the World Bank, the "velvet revolution"
2018 does not appear to have disturbed this development.
However, corruption in business, the judiciary and
the state administration is still a major problem. Most
economic and political analysts also believe that
Armenia's hope for a stable economy lies in good trade
relations with neighboring countries, which presupposes
that the Nagorno-Karabakh conflict can be resolved and
that lasting improvement can be achieved in relations
with Turkey and Azerbaijan.
Concrete things, such as road connections with
abroad, are also limited by the insanity. Two roads have
been built to the Nagorno-Karabakh enclave, which is
enclosed by Azerbaijan, and a third is planned. Road
construction is largely funded by donations from
Armenians in other countries and protected by the
Armenian military. Despite mountainous terrain there are
railway lines, but they are in need of renovation.
Armenian train traffic is operated by a Russian company,
through a concession agreement. Plans for a new line
between Armenia and Iran have not been implemented.
There are plenty of sights, especially related to
Christian history, but most of the tourists are still
FACTS - FINANCE
GDP per person
US $ 4,212 (2018)
US $ 12,433 million (2018)
5.2 percent (2018)
Agriculture's share of GDP
13.7 percent (2018)
Manufacturing industry's share of GDP
11.3 percent (2018)
The service sector's share of GDP
52.6 percent (2018)
1.7 percent (2019)
Government debt's share of GDP
51.3 percent (2018)
US $ 10 335 million (2017)
US $ 2,630 million (2018)
US $ 4,420 million (2018)
- US $ 1,165 million (2018)
Commodity trade's share of GDP
59 percent (2018)
Main export goods
metals, minerals, diamonds, food
Largest trading partner
Russia, Germany, China, Iran