72528 v1 World Trade Indicators 2009/10 Armenia Trade Brief Trade Policy External Environment Armenia experienced a steep decline in output in the The simple average of the overall rest of the world early 1990s following the breakup of the Soviet Union, tariff (including preferences) faced by the country’s but a strong recovery set in from the mid�1990s as a exports is 9.7 percent. But when weighted by actual result of a far�reaching liberalization and structural exports it drops to 0.9 percent, which is lower than the reform program. Since the early 2000s and related to averages for its regional and income comparators of the country’s WTO accession, Armenia has had a 2.1 and 3.1 percent, respectively. The weighted rest of highly open and 100 percent bound tariff regime. the world tariff faced by agricultural products is 1.8 Based on its simple average of the MFN applied tariff percent and by non-agricultural products it is 0.7 of 3 percent, Armenia has one of the most open trade percent. Armenia, which is an exporter of non-ferrous regimes in the Europe and Central Asia (ECA) region metals, was on the receiving end of one antidumping and among lower-middle-income countries (with investigation in 2008 initiated by the EU regarding averages of 6.8 and 11.4 percent, respectively). It is Armenian exports of certain aluminum foil. The real also ranked 9th out of 181 countries, where 1st is least effective exchange rate (REER) of the Armenian dram restrictive. Moreover, the 73 percent share of tariff appreciated by 11.5 percent in 2008, making exporters lines with zero MFN tariffs is among the highest in the less competitive abroad. Falling oil revenues, drops in region and in its income group. Similar to the majority remittances from Armenian workers in Russia, and of other countries in its comparator groups, Armenia dwindling reserves made the peg to the U.S. dollar continues to be more protective of its agricultural unsustainable. Following a 20 percent devaluation, the 2 goods than of its non-agricultural ones (with tariffs of currency was floated in March 2009. In the second 8.1 and 2.2 percent, respectively). However, the value quarter of 2009, the REER reflected a 13 percent added tax exemption for the agricultural sector has depreciation. expired, and since January 1, 2009 domestic 1 Armenia has free trade agreements with countries of agricultural producers are subject to VAT. The the Commonwealth of Independent States (CIS). Also, maximum MFN applied tariff, excluding alcohol and while a beneficiary of the EU Generalized System of tobacco, of only 10 percent is substantially lower than Preferences (GSP) for several years, Armenia has been the regional average of 159.7 percent. The trade policy a beneficiary of the GSP plus scheme since January 1, space, as measured by the wedge between bound and 2009. This scheme substantially extends duty-free applied tariffs (the overhang), is 5.2 percent, which is access to the EU market for around 6,400 tariff lines higher than the regional average of 2.7 percent, 3 meaning that Armenia has more flexibility in its trade until the end of 2011. Moreover, Armenia is policy. preparing to begin formally negotiating with the EU towards a comprehensive free trade agreement, and a EU preparatory fact-finding mission visited Armenia 4 in February 2009. Behind the Border Constraints Unless otherwise indicated, all data are as of August 2009 and are drawn from the World Trade Indicators 2009/10 Armenia remained in the top 30 percent of Database. The database, Country Trade Briefs and institutional environments conducive to business in Trade-at-a-Glance Tables, are available at 2009, being ranked 43rd out of 183 countries in the http://www.worldbank.org/wti. Ease of Doing Business Index. However, Armenia’s Logistics Performance Index score, which reflects the If using information from this brief, please provide the extent of trade facilitation in the country, is below the following source citation: World Bank. 2010. “Armenia regional and income group averages, reflecting a less Trade Brief.� World Trade Indicators 2009/10: Country Trade conducive climate for trade. Armenia scores 2.31 on a Briefs. Washington, DC: World Bank. Available at scale of 1 to 5, with 5 being the highest score, while http://www.worldbank.org/wti. World Trade Indicators 2009/10 Armenia Trade Brief the regional and income comparator averages are 2.59 Notes and 2.47, respectively. Armenia ranked 131st out of 150 ranked countries and 22nd in the ECA region (with 1. Armine Grigoryan, March 6, 2009. Turkey leading the regional group). Its strongest 2. World Bank, April 2009, p. 6. logistics indicator is domestic logistics cost, while the 3. European Commission, 2009. most lagging one is the quality of transport and IT 4. European Commission, February 17, 2009. infrastructure for logistics. 5. IMF, January 2009, p. 4. 6. IMF, January 2009, p. 4. Trade Outcomes References In 2008, Armenia could not maintain the trade growth momentum of 7.6 percent over the 2005–07 period, Armine Grigoryan. March 6, 2009. “A Cow is a Cow? and real growth of trade (in constant 2000 U.S. Large-farm Managers Say VAT Requirement Is dollars) in goods and services dropped to a low 0.4 Unfair.� ArmeniaNow. . both imports and exports slowed, with a bigger decline Economist Intelligence Unit (EIU). 2008. Country Profile: in exports. Import growth decelerated from 10.6 Armenia. EIU. percent over the 2005–07 period to 7.8 percent in European Commission. 2009. “Generalised System of 2008, while exports fell by 14.0 percent from an Preferences: EU Gives Developing Countries Duty- average rate of 2.8 percent over the 2005–07 period. Free Access with GSP+.� European Commission. December 9, 2008. . percent in 2008 from 32.6 percent in 2007. Trade was ———. February 17, 2009. “Caucus: Fact-Finding Trip temporarily disrupted during the August 2008 conflict Heralds First Steps Towards Stronger Trade in neighboring Georgia, as 70 percent of Armenia’s Relations with Armenia.� European Commission. 5 imports are transported through Georgia. Further, . led to falling commodity prices. Nominal exports International Monetary Fund (IMF). January 2009. IMF dropped by 1.1 percent, which reflected a 7.1 decrease Country Report No. 09/29. IMF. in goods exports and an 11.2 increase in services National Statistical Service of the Republic of Armenia. exports. The export of non-ferrous metals, a main 2009a. Time Series: Export, mln. USA dollars/2009. export for Armenia, had been declining in volume 6 August 5. . prices. In the first two quarters of 2009, exports ——— 2009b. Time Series: Import, mln. USA dollars/2009. dropped 47 and 44 percent, respectively, on a year-on- August 5. . percent increase over the first quarter of 2009. Total World Bank. April 2009. “Country Brief 2009: Armenia.� import growth slowed from 41.5 to 32 percent, with World Bank. July 8, 2009. . deceleration. In the first two quarters goods imports ———. “Country Partnership Strategy for the Republic dropped by 22 and 31 percent respectively, but 8.8 percent positive growth was noted in the second of Armenia for the Period of FY09–FY12.� South quarter over the first quarter of 2009. Remittances are Caucasus Country Department Europe and Central very important to Armenia and made up 8.9 percent Asia Region. May 12, 2009. of GDP in 2008. Although the dollar value of remittances increased, as a share of GDP it registered a fall from 9.2 percent in 2007. Remittances suffered toward the end of the year from the economic contraction in Russia (the destination of many workers) and the depreciation of the ruble against the dollar. FDI inflows in 2008 accounted for 7.9 percent of the GDP.