Country Report Armenia November 1998 Main report

Summary--Armenia 4th quarter 1998.

Outlook for 1999-2000: The president will continue to face criticism of his government's policies, fuelled to a large extent by next year's parliamentary election. Nevertheless, his position will remain secure, helped by the support of the largest parliamentary group. The July 1999 parliamentary election is likely to go ahead without the new election law. A short visit by the prime minister, Armen Darbinian, to Azerbaijan for a conference on regional transit routes represents an important breakthrough in Armenian-Azerbaijani relations. This, coupled with a softening of Armenia's position, augurs well for progress on the settlement of the Nagorny Karabakh conflict. The Russian crisis will halt the healthy pace of growth observed in the first eight months of this year and reverse progress on lowering inflation and the current-account deficit. GDP growth has been revised downwards to 5% for 1998, and is expected to slow further next year to 3.5%, before picking up to 6% in 2000. Following year-end inflation of -3% this year, inflation will reach double-digits in 1999- 2000 and the current-account deficit is expected to reach 18.2% of GDP by the end of the forecast period.

Review: The government has faced increased criticism by the opposition on its privatisation policy and on a number of other fundamental policy issues. The Armenian prime minister attended the TRACECA conference in Azerbaijan in the first high-level visit between the two countries since independence in 1991. The OSCE Minsk Group mediators have come up with a new proposal for the settlement of the Nagorny Karabakh issue which they presented at a visit to the region on November 10th-11th. Real GDP growth has picked up strongly owing to a high increase in agricultural output between April and September and the high pace of investment. Inflation continued to decline sharply in the third quarter. Overall trade slowed in the third quarter and the trade deficit narrowed.

© 1998 The Economist lntelligence Unit Ltd. All rights reserved
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