ÝSTANBUL – Turkish Daily News
Armenia’s economic growth and reforms have been remarkable in the past four years, but the country needs to normalize its trade relations with Turkey to further its economic development, said the International Monetary Fund (IMF).
In the latest IMF survey, the fund said over the past four years real GDP growth in Armenia has outpaced that of its neighbors and other low-income countries, averaging 12 percent a year.
“Also, since 2001, inflation has been low, at an annual average of 4 percent, and poverty and inequality have fallen rapidly. The government’s sustained commitment to economic stability and reform, especially since 2001, has been a critical element in this progress. Armenia is now at a cusp — more reforms can spur further gains, but faltering could put them at risk,” the fund said in an article on Armenia.
“At the same time, Armenia’s economic potential relies on an export-led development process that would benefit significantly from improved customs administration, normalized trade relations with Turkey, and a peaceful solution to the territorial dispute with Azerbaijan,” said the survey.
The fund said like many other constituent states of the former Soviet Union, Armenia experienced a major economic downturn after the Union’s dissolution. “Several early reforms, initiated in 1994-98, attempted to revitalize the economy. The reforms focused on privatizing land, holdings and small-scale enterprises as well as liberalizing prices, trade, and the foreign exchange regime. These policies allowed a shift to market prices and incentives, setting the stage for a period of market-driven capital formation. The economy rebounded in the second half of the 1990s, and annual inflation declined from triple to single-digit levels.” the report said.
As the 1990s ended, however, it was clear that imbalances continued to constrain economic performance. “Over 50 percent of the population still lived below the poverty line, and emigration continued. Armenia’s fiscal position was weak and hampered by a continuous accumulation of internal and external payment arrears. The banking sector also saw the collapse of about one-third of the country’s commercial banks. Lastly, corruption in state-owned energy and water companies generated large inter-enterprise arrears and a sizable quasi-fiscal deficit,” said the IMF in the survey.
In the face of these concerns, the authorities launched a renewed stabilization and reform effort in 2001 supported by the IMF’s Poverty Reduction and Growth Facility. Selected reforms were introduced in the fiscal, banking and energy sectors aimed at boosting growth through tax reform and deregulation, restoring confidence in fiscal management and improving expenditure control, restructuring the energy sector and cleaning up the banking system.