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- GDP (PPP):
- $20.4 billion
- 3.2% growth
- 0.3% 5-year compound annual growth
- $6,191 per capita
- Inflation (CPI):
- FDI Inflow:
Armenia’s economic freedom score is 67.1, making its economy the 52nd freest in the 2015 Index. Its overall score has declined by 1.8 points from last year, reflecting considerable deterioration in property rights, labor freedom, and monetary freedom. This decline was the eighth-largest in the 2015 Index. Armenia is ranked 23rd among the 43 countries in the Europe region, and its score puts it above the world and regional averages.
Armenia’s transition to a more dynamic and market-oriented economy has been facilitated by openness to global commerce and by regulatory reforms designed to encourage entrepreneurial activity. However, continued efforts, particularly to strengthen the independence of the judiciary and eradicate corruption, are needed to ensure progress in long-term economic development.
Although Armenia performs relatively well in most categories compared to world averages, the historical gains are not fully institutionalized, and the country’s economic freedom has been on a five-year downward path. This decline has taken place across six of the 10 economic freedoms, most notably in labor freedom, freedom from corruption, and monetary freedom.
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 dispute with Azerbaijan over the Nagorno–Karabakh region has been in effect since 1994, but minor hostilities continue. The economy relies on manufacturing, services, remittances, and agriculture. Armenia announced in September 2013 that it was suspending an association agreement with the European Union and would seek membership in the Russian-backed Eurasian Economic Union. The eurozone financial crisis and the sluggish Russian economy are drags on growth, and unemployment is high. The government relies heavily on loans from the World Bank, the International Monetary Fund, the Asian Development Bank, and Russia. Armenia is running a modest budget deficit.
In 2014, the president dismissed several well-known reformers and formed a new cabinet including officials who alledgedly have grown wealthy from their government connections. For example, the finance minister has long been subject to media allegations of corruption. The judicial system, hobbled by corruption, impedes the enforcement of contracts. Scores for rule of law are below average.
Armenia’s individual income tax rate is 26 percent, and its corporate tax rate is 20 percent. Other taxes include a value-added tax and an excise tax. The overall tax burden equals 22 percent of the domestic economy. Government expenditures equal about 24 percent of gross domestic income, and public debt reached a level equal to about 42 percent of the domestic economy in the most recent year.
Several business reforms have been implemented in recent years. The minimum capital requirement for establishing a business has been eliminated, licensing requirements have been reduced, and the bankruptcy procedure has been modernized. The non-salary cost of labor is moderate, but the informal labor market is sizable. Increased government subsidies distort prices in such sectors as public transportation, electricity, and gas.
Armenia has a 2.3 percent average tariff rate. Non-tariff barriers are low, but there are some bureaucratic barriers to trade and foreign investment. Land ownership is generally limited to domestic investors. 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 or sophisticated financial services.