Resource information
Armenia's structural reforms since
1999 have led to a strong economic record, including low
fiscal deficits and declining public debt over the
pre-crisis decade. Between 2001 and 2008 Gross Domestic
Product (GDP) grew at an average annual rate of 12 percent
and poverty fell from over 50 percent to about 28 percent of
the population. Over this period of rapid growth, prudent
fiscal management contained fiscal deficits between 0 and
2.5 percent of GDP and helped to reduce public debt from 49
percent to 16 percent of GDP. This fiscal headroom allowed
the Government to respond to the crisis with an
appropriately large fiscal stimulus. When GDP contracted by
more than 14 percent in 2009 and total revenues fell
sharply, nominal public spending was increased by 13 percent
to shore up the domestic economy and protect the poor and
vulnerable. Despite the severity of the crisis, the
Government maintained a sound macroeconomic framework while
continuing to undertake social protection expenditures to
mitigate the impact of the crisis on the most vulnerable
people. This was done by securing sizable external
financing. The fiscal deficit rose to 7.8 percent of GDP in
2009 and the public debt to GDP ratio rose from 16 percent
in 2008 to 40.2 percent. Efforts at fiscal consolidation
reduced the fiscal deficit to 5.6 percent of GDP in 2010,
but public debt is projected to reach 42 percent of GDP in
2011.The report is in two volumes: a synthesis volume and a
background volume. The synthesis volume summarizes the
macroeconomic context of Armenia (chapter one), analyzes the
recent debt dynamics and its implication for fiscal
consolidation (chapter two, then assess the revenue
potential the Government can tap (chapter three) while
ensuring key growth-sustaining and poverty-reducing
expenditures are maintained (chapter four). The background
volume provides more details on the assessment of the tax
potential of the mining sector (chapter one), and thoroughly
analyzes the efficiency of spending on the public sector
wage bill (chapter two), health (chapter three) and
education (chapter four).
