Armenian economy: Getting worse.

One of the ex-Soviet bloc countries with a population of just 3.20 million, is heading for a major economic slowdown in 2009-2010. According to the International Monetary Fund, the Armenian economy is expected to shrink by 15% in 2009.

Construction, the country’s largest industry and major constituent of the economy, is down in the dumps, having recorded a fall of 53%. Overall industrial output is down 12%. Unemployment is increasing and stands at around 7.50%. Inflation is however, coming down compared to previous years and is around 4.40%. After registering a average growth of 13.50% in the last three years, the country’s GDP is heading South now.

Among the country’s major industries are diamond processing, metals, etc. It exports pig iron, copper, non ferrous metals, foodstuffs, etc., and imports natural gas, petroleum, tobacco products, etc.

Armenia seems to be hit badly by several misfortunes at a time. Russia, on who the country depends a lot for remittances and cheap oil and gas, has also been hit by the global crisis, and this has affected Armenia in many ways. The country had to approach the IMF for an economic package to which the Institution has agreed.

Economic troubles have also forced the country to swallow its historical bitterness with Turkey and take a decision to re-open its borders with its former rulers. The opening of the Turkish-Armenian border is expected to ease the pressure on the Armenian economy, by promoting trade and other relations. It will also reduce the logistical cost of exporting Armenian products, thus making its products more competitive in the international markets. There is, however, opposition to the re-opening of the border, and this may result in political instability in future.