Armenian Economy

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The Armenian Economy

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 agro industrial complexes of the Soviet area. 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 (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 program that has resulted in positive growth rates in 1995-98. Armenia also managed to slash inflation and to privatize most small- and medium-sized enterprises.

The chronic energy shortages Armenia suffered in recent years have been largely offset by the energy supplied by one of its nuclear power plants at Metsamor. The Russian financial crisis generated concerns about Armenia’s economic performance in 1998. Although inflation dropped to 10% and GDP grew about 6%, the industrial sector remained moribund.

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