It says Armenia's growth in the past three years have made it the first former Soviet republic after the Baltics to achieve economic recovery. But growth came from a very low base. The report says average inflation last year was 18.8 percent but a drop is projected for 1997, perhaps to 9.4 percent. The report says the legal and regulatory framework is being reshaped in line with the requirements of a market economy and privatization should be completed by the end of 1997. Government finances are under pressure because of the difficulties in raising revenue and expensive energy imports.
Real incomes remain low.
Many workers are idle and many no longer have formal jobs. But real disposable incomes have started to recover because of rising non-wage earnings and income from the shadow economy. However, real wages in the public sector remain far below their earlier levels. It says Armenia will continue to require large capital inflows. But this is unlikely to happen before the conflict over Nagorno-Karabakh is resolved as this has placed an extremely heavy burden on the economy.