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Mr. Christian H. Beddies, Mr. Enrique A Gelbard, Mr. James McHugh, Ms. Laure Redifer, and Mr. Garbis Iradian

Abstract

Since 2000, Armenia's economic performance has been remarkable. Real economic growth has averaged 11 percent a year, annual inflation has averaged 3 percent, and poverty and inequality have fallen. The country has outperformed other low-income countries including other members of the Commonwealth of Independent States. This is particularly impressive given the geographical location of Armenia, the closure of two critical borders, and occasional political turmoil. The key factors behind Armenia's economic performance are prudent monetary and fiscal policies, liberal trade and foreign exchange regimes, rapid and relaively well-sequenced structural reforms, and support from the Armenian diaspora. In addition, the implementation of a poverty reduction strategy since 2002 has complemented the effect of economic growth on reducing poverty. This book assesses the country's economic transformation during the last 10 years and discusses the challenges to sustaining these successes.

Mr. Christian H. Beddies, Mr. Enrique A Gelbard, Mr. James McHugh, Ms. Laure Redifer, and Mr. Garbis Iradian

Abstract

This chapter contains an assessment of Armenia’s transition from a state-dominated economy to a market-oriented one during the past 10 years. It begins with a brief discussion of the economic background and continues with an analysis of the main reforms undertaken, the process of economic stabilization, and economic performance. The chapter revolves around three main issues: (1) Armenia’s strong economic performance compared to similar transition countries, especially since 2001; (2) the main factors behind the ignition of the growth process; and (3) the challenges to sustaining high rates of economic growth in the future.

Mr. Christian H. Beddies, Mr. Enrique A Gelbard, Mr. James McHugh, Ms. Laure Redifer, and Mr. Garbis Iradian

Abstract

This chapter reviews Armenia’s growth performance and poverty indicators since the early 1990s. It seeks to respond to the following four questions: What were the sources of growth? Can the recent rapid growth be sustained? How responsive was poverty reduction to economic growth? What is the minimum annual growth needed for Armenia to reach its poverty target by 2015? The analysis is based on a growth accounting exercise and the results of recent household surveys.

Mr. Christian H. Beddies, Mr. Enrique A Gelbard, Mr. James McHugh, Ms. Laure Redifer, and Mr. Garbis Iradian

Abstract

Fiscal consolidation has been the cornerstone of Armenia’s successful stabilization. Between 1995 and 2000, the fiscal adjustment was primarily an expenditure-based phenomenon, and the quasi-fiscal sectors (energy, water, and irrigation) remained a major source of subsidies, arrears, and contingent liabilities. By 2000, Armenia still had a sizable fiscal deficit, a weak tax base, and a large stock of domestic and external expenditure arrears. Since 2001, the authorities have renewed their efforts to rein in lax expenditure controls and fiscal and quasi-fiscal deficits. From the point of view of fiscal consolidation and macroeconomic stability, these policies were remarkably successful. Fiscal deficits declined, debt sustainability indicators improved, and both domestic and external expenditure arrears were eliminated. Furthermore, the quasi-fiscal deficit was progressively reduced.

Mr. Christian H. Beddies, Mr. Enrique A Gelbard, Mr. James McHugh, Ms. Laure Redifer, and Mr. Garbis Iradian

Abstract

Armenia’s high growth rates over the past three years have been fueled by fast-growing exports, donor inflows, remittances, and FDI. Strong export-led growth is rather surprising in a country that lacks natural resources, has been subject to a trade blockade from two important neighbors, and has poor transportation routes. This chapter analyzes changes in Armenia’s trade patterns in recent years, the role of government policies, the success of the diamond industry, and the costs and consequences of the trade blockade.

International Monetary Fund. External Relations Dept.

Like many emerging market and developing countries around the world, nine countries in the Caucasus and Central Asia are on the receiving end of large inflows of foreign exchange and are grappling with some of the same issues of how to control inflation and manage the exchange rate. An April 25 seminar in Almaty, Kazakhstan, organized by the IMF’s Middle East and Central Asia Department and co-sponsored by the National Bank of Kazakhstan, focused on policy options that would maximize the benefits of the inflows to the countries while maintaining external competitiveness and keeping inflation under control.

Mr. Christian H. Beddies, Mr. Enrique A Gelbard, Mr. James McHugh, Ms. Laure Redifer, and Mr. Garbis Iradian

Abstract

It is generally accepted that the financial system plays a pivotal role in economic development by mobilizing funds for investment projects with the highest probability of success. In fact, a well-functioning financial system is a key component of a modern economy, facilitating the exchange of goods and services, mobilizing savings, allocating scarce resources, mitigating market imperfections, and helping to diversify risks.44