Armenia’s economy has undergone a profound transformation since independence. Sustained growth, ambitious reforms, and external inflows of capital and remittances have created a market-oriented environment. However, the global financial crisis had a major impact on Armenia.
Double digit growth rates of pre-crisis period were replaced by a 4.3 percent rate after the crisis. Earlier strong performance of growth estimated to moderate to only 3.2 percent in 2013. Reduction in private consumption and public investments underpinned the decline.
The central challenge for the government is to mitigate the economic and social impacts of the global crisis for the midterm, while continuing policy and institutional reforms essential for recovery and long-term development. Increasing the economy’s resilience to external shocks and creating new opportunities for development are important priorities.
With a per-capita GDP of US$ 3,870 (GNI, 2013), Armenia is a lower middle-income country. Remittances from migrant workers play an important role in Armenia’s economy. The growth of household deposits is strongly supported by an 11 percent growth in remittances as of June 2013. With exports and remittances dependent on international prices for commodities, the Armenian economy is vulnerable to adverse shock to terms of trade from global developments.
The effect of the financial crisis on rural and urban poverty has been dramatic—the poverty rate increased from 27.6% in 2008 to 35% in 2011. The poor have been supported through targeted social expenditures and pension increases, and as growth picks up the number of people living in poverty is expected to fall.