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Armenia, Economy

Armenia is slowly recovering from natural and human-caused calamities that beset it during the late 1980s and early 1990s. An earthquake in 1988 severely damaged its infrastructure. A prolonged war in Nagorno-Karabakh, which involved Armenia, led to blockades of the country’s chief trade routes. Two unusually harsh winters, combined with a lack of heating fuels because of the blockades, resulted in deaths and near-famine conditions.

Armenia was less economically prepared for independence than most of the former republics of the Soviet Union. Years of Soviet central planning had developed an industrial base in Armenia that was highly dependent upon trade with other Soviet states. Those industries also were largely dependent on imported fuels. Blockades by Turkey and Azerbaijan and political instability in Georgia effectively isolated Armenia from world markets. A lack of fuels and the inability to sell products forced most factories to close. The gross domestic product (GDP), which measures the value of goods and services produced in the country, fell by 60 percent between 1991 and 1993.

Armenia has a strong tradition of education and entrepreneurship. A land of few natural resources, its highly skilled workforce is seen as the country’s principal advantage. The government of Armenia, even in the midst of crisis, laid the foundation for a market economy by liberalizing prices and implementing an aggressive privatization program. By 1995, inflation, which had increased the price of goods by as much as 20 fold a year, was under control and the GDP was again growing. In 2000 the GDP was an estimated $1.9 billion.

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