By 2013, the Armenian economy has leftbehind most of the hangover from the global financial crisisand a look at medium-to long-term growth drivers istherefore in order. Real Gross Domestic Product (GDP) growthreached 7.2 percent in 2012, and the current account deficitnarrowed, although it remained high. Macroeconomic buffershave been rebuilt to some extent, although the publicdebt-to-GDP ratio, at 44 percent, remains too high to relaxfiscal restraints. The central tenet of this report is thatthe government's job creation agenda requires adifferent growth model than the one followed before theglobal crisis. Reaching the goals of the government'sstrategy will require a combination of four factors: 1)higher investment and better financial intermediationbetween savers and investors; 2) better utilization of thelabor force, including the largely untapped resource ofArmenians abroad; 3) stronger competitive pressures in themarkets for goods and services, which will improveincentives for companies to innovate, adopt newtechnologies, and become more efficient; and 4) enhancedconnections of the landlocked Armenian economy with worldmarkets, including through land, air, and through internetand communication technologies. This report'stheoretical framework emphasizes structural reforms to drivegrowth. Economic growth theory distinguishes betweenaccumulation of the factors of production and enhancing theproductivity with which these factors are employed.
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