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Armenia improves its economic freedom score dramatically in Heritage Foundation’s Index

18.03.2020, 19:38
Armenia has improved its economic freedom score in the Heritage Foundation’s ranking to 70.6, making its economy the 34th freest in the 2020 Index
Armenia improves its economic freedom score dramatically in Heritage Foundation’s Index
YEREVAN, March 18. /ARKA/. Armenia has improved its economic freedom score in the Heritage Foundation’s ranking to 70.6, making its economy the 34th freest in the 2020 Index. The country’s overall score has increased by 2.9 points due to a significant spike in the fiscal health score. Armenia is ranked 18th among 45 countries in the Europe region, and its overall score is just above the regional average and well above the world average.

Economic freedom has remained fairly constant in Armenia during the past 15 years, with the economy vacillating between moderately free and mostly free. GDP growth in the past two years has been especially robust as the economy has rebounded from a 2015–2016 regional slowdown. The government is pursuing structural reforms, export promotion, and greater foreign investment to boost future economic growth.

To attract greater investment and finally break out of its holding pattern to move higher into the mostly free category, Armenia will need to focus more intently on improving judicial effectiveness and government integrity.

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 Comprehensive and Enhanced Partnership Agreement with the European Union in 2017. The government relies heavily on loans from Russia and international financial institutions.

The World Bank’s 2019 Doing Business report ranked Armenia 14th among 190 economies for ease of property registration. Courts suffer from low levels of efficiency, independence, and professionalism, and strengthening the judiciary needs to be a priority. Corruption is pervasive, is not regularly prosecuted, and has been aggravated by Russia’s consolidation of its influence over Armenia’s economy and regional security.

The top individual income tax rate is 26 percent, and the top corporate tax rate is 20 percent. Other taxes include value-added and excise taxes. The overall tax burden equals 20.8 percent of total domestic income. Government spending has amounted to 25.4 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 4.1 percent of GDP. Public debt is equivalent to 48.5 percent of GDP.

The processes for starting a business and enforcing contracts have been streamlined. The time needed to connect to the electricity grid has been reduced, and protections for minority investors have been strengthened. There is an abundance of skilled labor but a shortage of vocational workers. The government continues to subsidize electricity and began a new program of subsidized community grants in 2018.

The total value of exports and imports of goods and services equals 90.4 percent of GDP. The average applied tariff rate is 2.2 percent, and nine nontariff measures are in force. In general, government policies do not significantly impede foreign investment. The financial sector, dominated by banks, is evolving. The relatively small and fragmented banking sector is fairly well capitalized and open to foreign competition.

The group of countries with "mostly free" economies includes Georgia, which is 12th. Another former Soviet republic of Kazakhstan is 39th, Azerbaijan is 44th, Kyrgyzstan is 81st, Moldova is 87th, Belarus is 88th, Russia is 94th. They all are ranked as moderately free.

 The leaders of the Index of Economic Freedom 2020 are Hong Kong, Singapore, New Zealand, and outsiders are Cuba, Venezuela and North Korea. -0-