Armenia, like many post-communist countries, faces a serious threat from the global slowdown. Flagging demand for exports and a slowdown in remittances will likely take a toll on the economy. Haroutiun Khachatrian at the CACI Analyst reports on the measures the Armenian government is taking to deal with the threat. Among the measures are increased support for infrastructure projects and steps to improve the business environment for small and medium enterprises. (The folks at Doing Business will undoubtedly approve.)
One other initiative is, however, a little less orthodox. According to Khachatrian, the government wants to turn Armenia into a regional financial center:
Armenia also hopes to receive funding from an unusual source, namely the funds of Diaspora Armenians, who can use the Armenian banks [as] a safe haven during the financial turmoil elsewhere. The Armenian banking system is in fact in a rather unique situation, as the banks are solvent well above the usual adequacy standards, which makes their bankruptcy highly unlikely. At the same time, they have little foreign debt, which makes them independent of the crisis-hit world financial markets... In addition, the government plans to create a specific commercial structure, the so-called All-Armenian bank, which is expected to enable the Diaspora Armenians to invest their free cash in the profitable assets of their historical homeland.
Clearly, the world has found itself in an unusual situation when the Caucasus region is offering itself as a safe haven for shaky financial markets. And I will note that in a recent report on Emerging Europe Rating Dynamics (gated), Fitch pointed out that Armenia was among only three countries in emerging Europe that had seen a ratings upgrade since the start of the credit crunch. However, Armenia still merits a sovereign rating of only BB, placing it below every other country in the region except Moldova and Turkey. But, hey, credit rating agencies haven't proven that reliable in the recent past, so who knows?
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