Armenia Economy  

Armenia
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ARMENIA
Budget: Income .............. $1,004 Million
Expenditure ... $1,600 Million
GDP: $16 Billion
GDP real growth rate: 10.5%

GDP per capita: $5,400

Main Crops: fruit (especially grapes), vegetables; livestock

Natural Resources:
Small amounts of gold and copper

Major Industries:
Metallurgy, Electric Equipment, Tires

NATIONAL GNP
Under the old Soviet central planning system, Armenia had developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics in exchange for raw materials and energy. Since the implosion of the USSR in December 1991, Armenia has switched to small-scale agriculture away from the large agroindustrial complexes of the Soviet era. The agricultural sector has long-term needs for more investment and updated technology. The privatization of industry has been at a slower pace, but has been given renewed emphasis by the current administration. Armenia is a food importer, and its mineral deposits (copper, gold, bauxite) are small. The ongoing conflict with Azerbaijan over the ethnic Armenian-dominated region of Nagorno-Karabakh and the breakup of the centrally directed economic system of the former Soviet Union contributed to a severe economic decline in the early 1990s. By 1994, however, the Armenian Government had launched an ambitious IMF-sponsored economic liberalization program that resulted in positive growth rates in 1995-2006. Armenia joined the WTO in January 2003. Armenia also has managed to slash inflation, stabilize its currency, and privatize most small- and medium-sized enterprises. Armenia's unemployment rate, however, remains high, despite strong economic growth. The chronic energy shortages Armenia suffered in the early and mid-1990s have been offset by the energy supplied by one of its nuclear power plants at Metsamor. Armenia is now a net energy exporter, although it does not have sufficient generating capacity to replace Metsamor, which is under international pressure to close. The electricity distribution system was privatized in 2002 and bought by Russia's RAO-UES in 2005. Armenia's severe trade imbalance has been offset somewhat by international aid, remittances from Armenians working abroad, and foreign direct investment. Economic ties with Russia remain close, especially in the energy sector. The government made some improvements in tax and customs administration in 2005, but anti-corruption measures will be more difficult to implement. Construction of a natural gas pipeline between Iran and Armenia has been completed and it is scheduled to be commissioned by April 2007. Investment in the construction and industrial sectors is expected to continue in 2007 and will help to ensure annual average real GDP growth of more than 10%.