Inflation fell from almost 61 percent in that month to 3.9 percent in January, while GDP growth went from -14.8 percent in 1993 to 5.4 percent in 1994. Although the fund has generally praised Armenian economic policy, it has expressed concern this year over poor performance on tax collections and a growing debt burden. Such concern has resulted in a delay in its release of the first tranche of the loan from the first to the second quarter. There are grounds for uneasiness about the future of Armenia's economy beyond slightly worse statistics and a more standoffish IMF this year. It is unclear whether Armenia will be able to generate the sustained, rapid economic growth necessary to raise its standard of living.
Several factors make it difficult for Armenia to attract such investment, however.
The country is landlocked, isolated from world markets, and has no direct economic contact with two neighbors, Turkey and Azerbaijan. Most important, the threat of a renewed conflict over the unrecognized Nagorno-Karabakh Republic hangs over its economic prospects. It is likely that the Armenian diaspora, by itself, could provide sufficient foreign investment to improve the country's macroeconomic performance. Another obstacle to growth are banks unable to mobilize domestic savings or stimulate investment. Better economic prospects might result from improved relations with Russia.