ECONOMY: Implications of the World’s Financial Crisis for Armenia’s Economy (pdf)

A publication of Policy Forum Armenia

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Table of Contents

I. Introduction/Motivation ... 5

II. Channels of Impact ...6
A. Decline in Remittance Flows ... 6
B. Trade- and Investment-Related Implications ... 7
Reduction in Demand for Exports ... 7
Reduction in Prices for Armenia’s Key Export Commodities ... 8
Impact on Direct Investment ... 9
C. Financial Sector Channels ... 11
Direct Financial Links ... 11
Links with Non-Financial Corporate Entities ... 11
Exchange Rate Exposures ... 11
Systemic Risks ... 12
D. Reduction in Official Assistance Flows ... 12

III. Policy Recommendations ... 13
Addressing Capacity Issues ... 13
Fiscal Policy Response ... 14
Monetary and Exchange Rate Policy Response ... 15
Structural Policy Response ... 16

Figures
Figure 1: Armenia's Exports and Projected Economic Growth of Major Trading Partners ... 8
Figure 2: World Metal Price Indices ... 9
Figure 3: Economic Growth and Foreign Direct Investment in Armenia ... 10
References ... 18

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