By Emil Danielyan
Armenia has made more progress in the 15-year transition to a market economy than the other members of the Commonwealth of Independent States, according to an annual survey of former Communist states conducted by the European Bank for Reconstruction and Development (EBRD). The EBRD’s latest Transition Report released late Monday rates Eastern European and former Soviet states on nine indicators of economic reform, including privatization, enterprise restructuring and price liberalization. Of all the CIS countries Armenia was assigned the highest indicator scores.
The report says the reform process in Armenia has gained fresh momentum since 2004. “Among the reforming countries in the CIS, Armenia led the way with three [indicator] upgrades – for large-scale privatization, competition regulation and banking reform,” it says.
The EBRD sees “significant progress” also in neighboring Georgia as well as Ukraine and Moldova. “Elsewhere in the CIS, progress in reform was less pronounced,” it says, singling out Russia.
The London-based institution specializing in the former Communist bloc further praised the macroeconomic situation in Armenia and offered a favorable outlook for its mid-term growth prospects. The Armenian economy is on track to expand at a double-digit rate for the fifth consecutive year. The authorities in Yerevan reported a GDP growth of 11.7 percent during the first eight months of this year.
“Continuing growth is expected in the medium term, provided tight macroeconomic policies and progress in structural reforms are maintained,” reads the EBRD report. “New investments in infrastructure and other industries, and increased grant flows from the United States should also stimulate the economy.”
A senior official from the International Monetary Fund likewise said recently that “Armenia is on a promising path toward sustained high growth and the alleviation of poverty.”
Interestingly, the EBRD considers a further appreciation of the Armenian currency, the dram, among the “key risks” facing that growth. The dram’s strengthening has not prompted such warnings from the IMF and other Western donors that have endorsed the Armenian authorities’ exchange rate policy.
The EBRD welcomed a “prudent monetary policy” pursued by Armenia’s Central Bank and increased presence of foreign capital in its banking sector. “Nevertheless, the level of financial intermediation remains among the lowest in the transition economies,” says its report.
The report also notes that the Armenian government’s tax revenues continue to make up a very modest share of GDP and that local businesses “continue to perceive the business environment as weak.”