The global economic crisis seriouslythreatens the economic growth and poverty reduction thatArmenia achieved in recent years. The most recent dataindicate that the economy is now shrinking, with prospectsworsening in 2009 and 2010 when the full impact of thecrisis is expected to unfold. These developments are asetback for Armenia after a decade of nearly double-digitgrowth and substantial poverty reduction. Depending on thedepth of the crisis in Armenia, in its main tradingpartners, and in its migrant workers' host countries,and depending on the effectiveness of policy responses, thecrisis could have a protracted negative effect onArmenians' living standards. The economic downturn,coming on the heels of the food and fuel price increaseslast year, will have particularly difficult consequences forthe poor and vulnerable who have limited coping means todeal with these successive shocks. The note identifies themain channels of transmission to households of the currentglobal economic crisis and estimates its potential impact onpoverty in Armenia. Given uncertainties regarding the scaleof the crisis and how households are likely to cope, thenote is intended to provide indicative estimates of thepoverty impact of the crisis, rather than precise estimates.These estimates are made by simulating the effects of theanticipated slowdown on household consumption using datafrom the 2007 Integrated Living Conditions Survey (ILCS).The key messages that come out of the analysis are that thecrisis will have potentially serious implications forpoverty and that this calls for significant responses by theGovernment of Armenia and its development partners. Thegovernment is taking a number of steps to provide protectionto the poor, including the protection of public spending onsocial protection and other pro-poor programs and to improvethe targeting efficiency of the programs. These measuresshould help lessen the impact of the crisis on the poor andthe vulnerable.
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