ARMENIA

rmenia’s economic freedom score is 71.9, making its economy the A 32nd freest in the 2021 Index. Its overall score has increased by 1.3 points, primarily because of an improvement in . Armenia WORLD RANK: REGIONAL RANK: fiscal health is ranked 18th among 45 countries in the Europe region, and its overall 32 18 score is above the regional and world averages.

ECONOMIC FREEDOM STATUS: Economic freedom in Armenia has hovered between moderately free MOSTLY FREE and mostly free for many years. GDP growth during the reporting period has continued to be strong. To institutionalize higher levels of economic freedom more firmly, the government needs to maintain its focus on improving judicial effectiveness and government integrity. Stronger rule of law would also have a positive impact on investment freedom.

IMPACT OF COVID-19: As of December 1, 2020, 2,193 deaths had been attributed to the pandemic in Armenia, and the economy was forecast to contract by 4.5 percent for the year.

ECONOMIC FREEDOM SCORE

▲ UP 1.3 POINTS 71.9

0 50 60 70 80 100  REGIONAL WORLD AVERAGE AVERAGE 61.6 70.1 (EUROPE REGION)

HISTORICAL INDEX SCORE CHANGE (SINCE 1996): +29.7

RECENT FREEDOM TREND QUICK FACTS



71.9 POPULATION: UNEMPLOYMENT: 70.3 70.6 3.0 million 17.0%  68.7 67.7 GDP (PPP): INFLATION (CPI): $33.4 billion 1.4% 7.6% growth in 2019

5-year compound FDI INFLOW:  $254.5 million annual growth 4.8% $14,220 per capita PUBLIC DEBT: 53.4% of GDP 

       2019 data unless otherwise noted. Data compiled as of September 2020

BACKGROUND: Armenia was a Soviet republic until independence in 1991. In 2018, massive protests against corruption led to the election of a reform-minded government headed by Prime Minister Nikol Pashinyan with the support of a sizeable parliamentary majority. Nevertheless, corruption remains a persistent problem. Armenia’s decades-long occupation of parts of Azerbaijani territory ended after more than six weeks of heavy fighting in 2020 when both sides agreed to a Russian-backed peace plan. The economy relies on manufacturing, services, remittances, and agriculture. Russia is Armenia’s principal export market, and Armenia joined Russia’s Eurasian Economic Union in 2015. It also signed a Comprehen- sive and Enhanced Partnership Agreement with the European Union in 2017. The government relies heavily on loans from Russia and international financial institutions.

86 2021 Index of Economic Freedom WORLD AVERAGE | ONE-YEAR SCORE CHANGE IN PARENTHESES 12 ECONOMIC FREEDOMS | ARMENIA

RULE OF LAW GOVERNMENT SIZE

(–3.4) (+1.2) (+1.6) (+2.2) (+0.7) (+15.5)

 

 

 

 

 

57.3 55.3 45.0 87.1 81.3 84.3   Property Judicial Government Tax Government Fiscal Rights E ectiveness Integrity Burden Spending Health

Armenian law protects secured interests in property, both The top individual income tax rate is 23 percent, and the personal and real, and provides a basic framework for secured top corporate tax rate is 18 percent. The overall tax burden lending. Title registration is supported effectively. Courts equals 20.9 percent of total domestic income. Government face systemic political influence, and judicial institutions are spending has amounted to 25.0 percent of total output undermined by corruption. Corruption is pervasive, is not (GDP) over the past three years, and budget deficits have regularly prosecuted, and has been aggravated by Russia’s averaged 2.5 percent of GDP. Public debt is equivalent to consolidation of its influence over Armenia’s economy and 53.4 percent of GDP.

 .regional security

REGULATORY EFFICIENCY OPEN MARKETS

(+0.9) (+2.0) (+0.9) (–6.8) (No change) (No change)

 

 

 

 

 

81.9 74.5 76.9 73.8 75.0 70.0   Business Labor Monetary Trade Investment Financial Freedom Freedom Freedom Freedom Freedom Freedom

Armenia has increased minority shareholder protections Armenia has 11 preferential trade agreements in force. The by increasing shareholders’ rights and shareholders’ say trade-weighted average tariff rate is 5.6 percent, and 10 in corporate decisions. Transparency has been added to nontariff measures are in effect. Foreign investment in various ownership and control structures. Value added per worker has sectors remains regulated. The overall financial sector, not improved. The government continues to subsidize electricity, fully developed and subject to state control, is dominated by and the IMF has found that lack of transparency in reporting fairly well-capitalized banks. In the wake of the ongoing pan- public-sector spending may be masking the true extent of demic, no capital-control measures have been implemented. subsidies to other state-owned enterprises.

The Heritage Foundation | heritage.org/Index 87