Officials from the International Monetary Fund (IMF) and other donor
organizations now believe that decade-long growth in Armenia has
produced a sizable reduction in poverty. "Armenia is on a promising path
toward sustained high growth and the alleviation of poverty," Agustin
Carstens, the IMF's deputy managing director, said at the end of a
mid-July visit to Yerevan. In May, the IMF expressed its approva of
Armenia’s economic directionl by offering a three-year, $34-million loan
agreement.

According to official statistics, Armenia's Gross Domestic Product rose
by 10.2 percent in the first half of this year. The GDP growth has
averaged 11 percent during the previous four years. Carstens strongly
endorsed the Armenian government's economic strategy. “The IMF stands
ready to continue to assist Armenia with policy and technical advice, as
well as financial support in implementing its reform agenda,” he said,
adding that the Armenian economy is expanding so fast that it now runs
the risk of “overheating.”

Brian Kearney, who runs a US government-funded project to reform
Armenia's social security system, said economic growth has had a visible
impact on living standards, adding that it has also lifted the public
mood. “There is a new buoyancy and a new confidence that wasn't here
five years ago. It might seem a small thing but, for me, just the change
in people's demeanor and approach to life is remarkable.”

“Five years ago it was very much hanging on,” Kearney added. “Now I see
people striding forward.”

Household income surveys regularly conducted by the Armenian government
show that the proportion of Armenians living below the official poverty
line shrunk from 55 percent in 1999 to just below 43 percent in 2003.
The poverty rate would stand at 32 percent if it were calculated using
World Bank methodology that uses consumption expenditures, as opposed to
income. Each income survey is based on data collected from about 5,000
households. Officials say the results of similar research conducted last
year and to be released this fall will show a further drop in poverty.

"There are very few countries that have achieved such important progress
in such a short period of time," the IMF's Carstens said.

However, some economic analysts view official figures with skepticism.
For instance, many analysts believe the official poverty line of about
13,000 drams ($30) per month is set too low given the rising cost of
living. The National Statistical Service of Armenia (NSSA) estimated in
a 2003 report that the average Armenian family spent two thirds of its
income on food -- a telling indicator of persisting hardship. “The
consumption of high-priced food products such as meat products, milk
products, fruits and eggs is very low,” the report said. The government
agency also asserted that many Armenians still cannot afford adequate
healthcare as “only one in three persons with health problems applied to
a doctor for medical care.”

There is also a mounting income gap dividing the rich and poor, as well
as Yerevan residents from those living elsewhere. Many rural areas have
hardly seen any development since the economic collapse of 1992-1993,
when Armenia's GDP shrunk by half due to the outbreak of wars in
Nagorno-Karabakh and elsewhere in the South Caucasus. The social
polarization reflects a highly uneven distribution of benefits of
economic growth, some experts contend. The gap is widened further by
widespread tax evasion among the wealthiest citizens. The Armenian
government's tax revenues are on track to rise by about 30 percent this
year, but they will still make up a very modest 16 percent of the GDP.

More importantly, the rate of job creation has lagged behind the
economic expansion, failing to alleviate the country's number one social
problem -- unemployment. The official unemployment rate, measured by the
Armenian Ministry of Labor, stands at just over 10 percent. But the real
figure is probably much higher, many economists estimate. The NSSA, for
example, puts the unemployment rate at a staggering 30 percent, citing a
2003 labor force survey.

Nevertheless, anecdotal evidence of increased prosperity is strong. This
includes skyrocketing real estate prices, a growing number of cars,
shops and other small businesses as well as a construction boom in
central Yerevan. Economists still cannot explain what exactly has driven
economic growth over the past decade. First-half growth in 2005 appears
to be connected with a 43 percent surge in the construction sector.
Another important factor is cash remittances from hundreds of thousands
of Armenians working abroad. The Armenian Central Bank says remittances
jumped by 50 percent to $750 million in 2004.

In addition, merchants have adapted to the continuing economic blockades
by Azerbaijan and Turkey and the resulting high transportation costs.
According to official statistics, the tiny landlocked country has
doubled its GDP and tripled exports since the late 1990s. “In five years
time people will reflect well when they look back at what has been done
over the past five years," Kearney said.