Armenia – Country partnership strategy for the period of FY09 – FY12

The Country Partnership Strategy (CPS) for Armenia has been prepared in the context of the global economic crisis and its impact on the country. It focuses on the near term needs of addressing vulnerability and mitigating the adverse poverty effects of the crisis as well as laying the foundation for promoting medium term competitiveness and growth.

The CPS for FY09-12 presents an integrated strategy for the World Bank Group. It reflects Armenia's transition to International Development Agency/International Bank for Reconstruction and Development (IDA/IBRD) blend status from fiscal year 2009, as well as the full integration of the International Financial Corporation (IFC) program for the country.

With income per head that averaged $3,200 over 2006-08, Armenia ranks as a lower middle-income country. This CPS envisages full use of the IDA-15 envelope (projected at $150 million), the IBRD lending limit of $395 million over this four fiscal year period, as well as projected IFC commitments in the range of $120-160 million. This assistance effort is supported by a far-reaching program of advisory services and trust fund support.

The country's economic transformation since the collapse of the Soviet Union has been profound. The economy today is market-oriented, highly open to trade, capital, and technological innovation, and is based on services (particularly construction), light industry, and metals, although a significant share of the population is still dependent on agriculture. Gross Domestic Product (GDP) expanded by double-digit rates annually over the past dozen years, with growth led by non-tradable and fuelled by high remittances and capital inflows. Macroeconomic policies were supportive, with fiscal deficits being small and monetary and exchange rate policies being prudent. Inflation was kept low, the overall size of the government was restrained as private initiative was permitted to drive the economy, and public external debt was also extremely low. Rising budget revenues were directed at rising real spending on public provision of public goods and services.