The difficulty of Armenia’s transition from a communist economy to a capitalist one has been exacerbated by the devastating earthquake of 1988, and the continuing blockade of Armenia by Azerbaijan and Turkey. The widespread collapse of the interdependent Soviet industries, as well as the blockades preventing the importation of raw material and the exportation of products, have caused a severe shrinking of the country’s economy.
Still, there has been economic growth in the country in the past 20 years, and factors like the 1994 cease-fire in the Nagorno-Karabakh conflict with Azerbaijan has helped. New industries, like jewelry making, information technology (IT) and tourism, are adding to more traditional sectors of Armenia’s economy, like agriculture.
The country’s gradual economic development has even been recognized by international institutions like the International Monetary Fund (IMF), World Bank, the European Bank for Reconstruction and Development and others, which have allotted Armenia with significant loans.
These loans are being used to reduce Armenia’s budget deficit and stabilize its currency, develop private businesses, and invest in sectors like energy, transportation, health and education.
Though Armenia is on a steady incline upwards, its economy still relies heavily on financial support from Armenians abroad. Many of Armenia’s foreign direct investments come from the Armenian Diaspora, who often finance big public projects in the country.