2016 Index of Economic Freedom

Armenia

overall score67.0
world rank54
Rule of Law

Property Rights20.0

Freedom From Corruption37.0

Limited Government

Government Spending80.7

Fiscal Freedom83.8

Regulatory Efficiency

Business Freedom77.5

Labor Freedom62.2

Monetary Freedom72.8

Open Markets

Trade Freedom85.6

Investment Freedom80.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 3.3 million
  • GDP (PPP):
    • $24.3 billion
    • 3.4% growth
    • 4.2% 5-year compound annual growth
    • $7,374 per capita
  • Unemployment:
    • 17.1%
  • Inflation (CPI):
    • 3.1%
  • FDI Inflow:
    • $382.8 million
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Considerable diversification of the economic base has increased economic dynamism in Armenia. Broad simplification of business procedures has facilitated regulatory efficiency. Following expansionary fiscal policies in recent years, steps have been taken to limit the cost of government through more prudent management of public finance.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 67.0 (down 0.1 point)
  • Economic Freedom Status: Moderately Free
  • Global Ranking: 54th
  • Regional Ranking: 23rd in Europe
  • Notable Successes: Open Markets and Management of Public Finance
  • Concerns: Property Rights, Corruption, and Labor Freedom
  • Overall Score Change Since 2012: –1.8

Although Armenia performs relatively well in many categories of economic freedom, deeper institutional reforms are needed in areas like judicial independence and government transparency. Despite progress in tackling corruption, the close relationships within political and business circles raise concerns about cronyism and special-interest 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 24-year occupation of Azerbaijan’s Nagorno–Karabakh region has been in effect since 1994, but minor hostilities continue. 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. The eurozone financial crisis and the sluggish Russian economy, which accounts for 23 percent of Armenian exports, have inhibited growth. Unemployment is high. 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 20.0 Create a Graph using this measurement

Freedom From Corruption 37.0 Create a Graph using this measurement

Pervasive corruption has been aggravated by Russia’s consolidation of its influence on Armenia’s economy and regional security. Bribery and nepotism are reportedly common among government officials, who are rarely prosecuted or removed for abuse of office. The judiciary suffers from a lack of independence and transparency. Pervasive police misconduct hobbles law enforcement.

Limited GovernmentView 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 amounts to 23.4 percent of total domestic income. Government spending has moderated at 25.4 percent of total domestic output, and budget deficits remain relatively small. Public debt is around 45 percent of GDP.

Regulatory EfficiencyView Methodology

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. Widespread public protests in June 2015 caused the government to block a planned pass-through of rate hikes by the Russian-owned power generation company.

Open MarketsView Methodology

With a 2.2 percent average tariff rate and few non-tariff barriers, Armenia is relatively open to trade. As with many other countries, however, foreign ownership of land is restricted, and bureaucratic hurdles may impede trade and foreign investment. 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

Bar Graph of Armenia Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Switzerland810.5
2Ireland77.30.7
3Estonia77.20.4
4United Kingdom76.40.6
5Denmark75.3-1.0
6Lithuania75.20.5
7The Netherlands74.60.9
8Germany74.40.6
9Luxembourg73.90.7
10Iceland73.31.3
11Czech Republic73.20.7
12Georgia72.6-0.4
13Finland72.6-0.8
14Sweden72-0.7
15Austria71.70.5
16Norway70.8-1.0
17Latvia70.40.7
18Poland69.30.7
19Cyprus68.70.8
20Spain68.50.9
21Belgium68.4-0.4
22Macedonia67.50.4
23Armenia67-0.1
24Malta66.70.2
25Slovakia66.6-0.6
26Hungary 66-0.8
27Albania65.90.2
28Bulgaria65.9-0.9
29Romania65.6-1.0
30Portugal65.1-0.2
31Montenegro64.90.2
32France62.3-0.2
33Serbia 62.12.1
34Turkey62.1-1.1
35Kosovo61.4N/A
36Italy61.2-0.5
37Slovenia60.60.3
38Croatia59.1-2.4
39Bosnia and Herzegovina58.6-0.4
40Moldova57.4-0.1
41Greece53.2-0.8
42Russia50.6-1.5
43Belarus48.8-1.0
44Ukraine46.8-0.1
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