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Development Strategy of the Republic of Armenia for 2014-2025

PREFACE

1. Taking into consideration developments and new realities induced by the global financial and economic downturn, the Government of the Republic of Armenia has revised the Sustainable Development Program (SDP) adopted in 2008.  

2. The revised strategy is aimed at ensuring a coordinated post‐crises strategic framework for the development of state policies. The strategy provides an opportunity to the government to unite national capacities in developing the country’s long‐term development vision, taking into consideration the accumulated experience, current conditions and global development challenges.   

3. The period covered under the strategy is until the year 2025. It documents the country’s enlarged group of socio‐economic development priorities, objectives, main development obstacles and restrictions, key reforms to achieve priority objectives and policy tools, as well as main risks.

4. The overarching goal of the government long‐term strategy is permanent increase of welfare of society.  

5. Taking into account peculiarities of current stage of development of the country, the increase of employment through creation of quality and high productivity jobs is announced as the main objective of the strategy.

6. The activities of the RA Government will be directed at the creation of possibilities for everyone to get fair income according to the working efforts exerted. Implementation of the program will guarantee for each member of the society the strong feeling of being protected and socially secured by the own state. The activities aiming at personal development of the citizen of RA, his/her professional growth, civic education and enhanced cultural level will be always under the strong focus of the Government, fostering the willingness of each person to live in the homeland.     

7. The document does not have detailed sector coverage, yet is provides sufficient milestones to develop sector programs within a standard logical frame.  At the same time, the document sections and sub‐sections are not proportional in terms of sector policy details and coverage, which is mainly due to specifics of some sectors.  Hence the strategy should be viewed from the context of already approved sector programs, depending on their adoption timelines, coverage, and programmed time horizon, to the extent they are in line with the strategic priorities.     

8. One of the key missions of the document is ensuring strategic guideline in the coming years for the development of medium‐term expenditure framework (MTEF).

9. International economic integration processes are going to play an important role in the country’s social and economic development during the programming period. With this regard RA membership in Customs Union, development and further deepening of economic relationships with its member states is going to have the highest priority. At the same time, taking into account common values, harmonized cooperation with European Union will continue on all mutually important directions.  

10. As it was with Sustainable Development program, current program has also been developed with active involvement of civil society. The adopted approach presumes providing and deepening possibilities for social partnership and participatory monitoring also during the implementation of the program. In accordance with the Agreement signed between the Government of RA and Civil Cooperation Network (CCN) in February of 2013, the CCN will represent the interests of wider society during the implementation, monitoring and evaluation as well as revision of the program, if the later would be required. For the successful implementation of the program it is important  to ensure participation of CCN in the activities carried out for the development of policies and for the evaluation, monitoring and supervision of decisions taken by public governance bodies. With this purpose the State will support the measures implemented by the civil society to develop participatory institute and the steps undertaken for its formalization. In the frames of participatory process the CCN will set up its structural units based on the principles of self regulation and will define their respective rights and obligations, whereas the public bodies responsible for the implementation of the program will take necessary actions to guarantee cooperative and transparent environment.    

I. MAIN RESULTS OF THE SUSTAINABLE DEVELOPMENT PROGRAM AND THE NEED FOR ITS REVISION

1. MAIN OBJECTIVES AND PRIORITIES OF THE SUSTAINABLE DEVELOPMENT PROGRAM

11. The Sustainable Development Program (SDP) had three sets of objectives:  

Reduction of poverty in 2008‐2021 to the extent that poverty will not be a problem of economic development, and extreme poverty will be totally eliminated and will no longer be a significant social phenomenon.    

Elimination of human poverty and ensuring accelerated human development, as a result of which, in a few years, the country should have moved from the group of countries with average human development to the group of countries with high level of human development.

Mitigation of disproportions of the territorial development and acceleration of economic growth of underdeveloped regions by developing and implementing a relevant territorial policy.

12. In order to achieve the mentioned objectives, SDP envisaged three sets of priority strategies:    

Economic policy for ensuring sustainable and accelerated economic growth;  

• Active social and income policy for vulnerable groups of population (including the poor);
• Modernization of governance system, including improved effectiveness of state governance and ensuring accelerated growth of the resource envelope at the disposal of the state.

13. SDP economic policy priorities focused on ensuring accelerated, sustainable and poor‐ oriented economic growth and consisted of two groups: framework and direct or investment policies.

14. Framework policy is the same for all participants of the relevant sector and does not include the use of public funding for achieving policy objectives.  

15. The basis for SDP economic policy was an approach, which assumed that the quality of the growth environment (business environment and investment climate in particular), freedom to enter the market, prevention of abuse by economic entities having dominant or monopoly position and promotion of competition, labor all foreign and sustainable domestic macroeconomic policy, have a decisive role in ensuring accelerated and sustainable economic growth.  

16. Framework economic policy priorities included the design and introduction of the main elements and institutions of knowledge‐based economy, as well as the institutional modernization of the country, which also can be considered as the environment where economic growth takes place. 

17. Direct or investment policy assumes the financial intervention of the state for achieving policy goals and has an interventionist nature.  

18. The direct economic policy of SDP was to make only those investments from public financial resources, either fully or partially, which currently or in the near future, cannot be made by the private sector, but are necessary for ensuring economic growth and aim to eliminate the bottlenecks of the economy. Thus, the main priorities of the direct policy were public investments in infrastructure sectors.

19. Another priority of the direct policy was investments within the framework of Public‐Private Partnership, which would be necessary for attracting foreign investment, as well as mitigating disparities of regional development.

20. The targeted social policy, which was the second strategic priority of the SDP, was a mix of direct and framework policies, where the direct policy assumed the accelerated growth of the public funding in the corresponding sectors, and the framework policy was directed to considerable improvement of the quality, conditions and accessibility of services provided to the population in the social sector.

21. The active social policy covered the following sectors:  

Social assistance, where the priority is the allocation of family benefits, as the main tool for  eradicating extreme poverty. The main objective of the framework policy was to continuously improve the targeting of family benefits, and the goal of the direct policy was to increase family benefits to around 70 percent of the poverty line. Social insurance, where the priority of the direct policy was the sharp increase of pensions up to the value of the minimum consumer basket, and the framework policy aimed to move labor pensions to the budget, as well as establish the foundations for funded pension and its gradual introduction.  Social infrastructures, where the priorities of the direct policy were the accelerated increase in the volumes of public funding for basic social services (including education and healthcare), and the main priority of the framework policy was to improve the accessibility, effectiveness and quality of services by continuing the comprehensive reforms in the sector.  Income policy, where the direct policy aimed to ensure the accelerated growth of primary incomes in the budgetary and social infrastructure sectors. The main priority of the framework policy was the use of the set value of minimum wage as one of the main tools for significantly reducing the number of “working poor” and the later elimination of this group of population.

22. Improving the effectiveness of the state governance sector, at all levels of governance, which is the third strategic priority of the Sustainable Development Program, is also a mix of direct and framework policies, where the direct policy aims to continually increase the volumes of resources at the disposal of the state, and the framework policy describes and lists the measures, which will ensure the mentioned increase, as well as significantly increase the effectiveness of the state and the quality of and access to services provided by the state, as well as the level of accountability to citizens.

23. The framework policy for increasing the volume of resources at the disposal of the state2 should have focused on significantly improving tax and customs administration and disclosure and reduction of shadow economy.

24. The framework policy for public expenditures aims to improve their distribution and technical effectiveness, in particular, through transition to results‐based and program budgeting.

25. The priorities of the framework policy for enhancing the effectiveness of state governance are the drafting and introduction of a new effective anticorruption strategy, maximum possible transparency of decisions made by the state and ensuring active participation of the civil society in the process of decision‐making, in particular through the introduction of electronic management and information systems at all levels (e-government, e-management, etc.).

2. 2008‐2012 GENERAL DEVELOPMENT TRENDS AND THE NEED FOR REVISION OF THE SUSTAINABLE DEVELOPMENT PROGRAM

26. The Sustainable Development Program was approved by the Decree of the Government of Armenia No. 1207‐N dated 30 October 2008, right at the outset of the global financial and economic crisis. The crisis could not have been taken into account during the drafting of the program and its spread throughout the world in 2008‐2009 could not have no impact on Armenia's economy and have no influence the process of SDP implementation and achievement of its indicators. Thus, the crisis, by itself, became the main factor justifying the revision of SDP.

27. The economic growth model is Armenia formed prior to the crisis (2003‐2008) was based on foreign financing (direct foreign investment, official and private transfers), the volumes of which grew year‐to‐year. As a result, in conditions of double‐digit economic growth, imports grew rapidly, the competitiveness of local industrial products in the domestic market declined, non‐agricultural employment rates did not grow, and the relative and absolute volumes of exports shrunk.

28. In conditions of declining competitiveness of the industry and the relative decrease in exports, the main engine of economic growth in the country was construction and services sectors, the combined share of which in the GDP increased from 50.1 percent in 2003 to 56.4 percent in 2007 and 59.3 percent in 2008, while the combined share of industry and agriculture in the GDP declined from 44 percent in 2003 to 29.6 percent in 2008.

29. Considering that the model of economic growth based on foreign financing and the resulting increase in domestic demand cannot be maintained in the long run, the SDP envisaged a gradual transition to an economic growth model based on the accelerated increase in the volumes of exported goods and services, as a result of which the country would gradually become less dependent on foreign financing and the share of construction in GDP would decline gradually. 30. The impact of global financial and economic crisis emerging in September 2008 reached Armenia in the fourth quarter of 2008, when the GDP produced in the quarter declined by 1.2 percent compared to the same period in 2007, and the decline continued in 2009 resulting in a 14.1 percent drop in GDP. The crisis ended in 2010, when 2.2 percent year‐on‐year GDP growth was recorded in Armenia, and the global economy, of which also Armenia entered the recovery phase.

31. The recovery continued in 2011‐2013. Thus, during that period average growth was 5.1 percent: Main contributors to the growth were the services (including trade) – 2.2 percentage points, agriculture – 2.0 percentage points and industry – 1.4 percentage points. The construction sector continued to have negative contribution to GDP (-1 percentage point).

32. At the same time economic crisis has brought in new global challenges, which have created necessity to revise country’s long‐term development strategy in correspondence to the post‐ crisis realities, the main of which are as follows:

(1) As a result of the global economic crisis, the sectoral structure of economy changed significantly and the share of construction has visibly declined because of the increase in the share of all other macro‐sectors.  It is, on the one hand, more stable compared to the pre‐crisis structure, since it is less dependent on the volumes of foreign financing, and on the other hand, unlike the previous development model, it cannot ensure very high growth rates, because of the sharp decline in construction and its contribution to economic growth.  

(2) The sharp decline of the volumes of foreign financing (Sum of net foreign direct investments, private and official transfers) by about 31 percent in 2009‐2011 has made it significantly difficult to continue the 2003‐2007 economic growth model based on the increase in domestic demand in current conditions.

33. At the same time, a new challenge is created by the fact, that until now economic growth in Armenia does not lead to increased employment: 1) In 1994‐2003, during the recovery growth, the main factor behind the significant decline in employment and changes to its structure was the transition process, since the new economic structure had a lower level of demand for jobs, compared to the former structure which was being dismantled and transformed. 2) In 2003‐2008, the rapid economic growth did not result in increased employment, because the growth in the newly formed economic sectors was assured mainly as a result of higher productivity, and consequently higher incomes from employment, while employment continued to shrink in sectors inherited from the USSR, as well as in social infrastructures. 3) In 2008‐2009, there was a decline in employment as a result of economic crisis, due to the decline of production in new sectors, particularly in construction, and the subsequent job losses.

34. The preconditions and causes of economic growth without increased employment in Armenia after independence can be divided into two groups: 1) The first one is based on objective reasons resulted from transition processes and impact of corresponding factors is gradually diminishing and in the current phase of development, where the new structure of the economy has already been formed and the old Soviet era sectors have practically transformed or disappeared, they can no longer be considered as crucial or decisive.

and the old Soviet era sectors have practically transformed or disappeared, they can no longer be considered as crucial or decisive.

35. Nonetheless, starting from 2008 these approaches have been significantly revised and institutionalized and in addition to framework policy and activities aimed at improvement of business environment and investment climate, the government has implemented activities financially supporting business and individual sectors.  At the same time, clarification of the scope of the said activities in medium‐and long-term perspectives, is still on the agenda.  

36. Another important reason for developing a new strategic program was the change of views on both economic policy and its toolset, which was demonstrated during the global economic crises and continues until now, emphasizing the importance of increasing the state regulatory role and the direct policy.   

II. ARMENIA DEVELOPMENT STRATEGY (ADS) PRIORITIES AND MAIN OBJECTIVE

3. THE ADS TIME COVERAGE AND PRIORITIES 

37. The ADS covers the period of 2014‐2025 and is the country’s main socioeconomic development strategy and the basis for medium‐term, sectoral and other program documents.  

38. Being the primary guide of the Government, ADS is based on the following four priorities: 1) Priority 1. Growth of employment;

2) Priority 2. Development of human capital;

3) Priority 3. Improvement of social protection system; and

4) Priority 4. Institutional modernization of the public administration and governance.

39. During the first five years of ADS, employment growth will be recognized a key priority, highlighting activities aimed at creation of quality, well‐paid jobs. The activities of the RA Government will be directed at the creation of possibilities for everyone to get fair income according to the working efforts exerted.

40. Activities aimed at development of human capital will be geared at enhancing the scope, quality and accessibility of primary services (including healthcare, education, science, culture and primary infrastructures) with a special emphasis on nature‐human relationships and harmonious development as well. The activities aiming at personal development of the citizen of RA, his/her professional growth, civic education and enhanced cultural level will be always under the strong focus of the Government, fostering the willingness of each person to live in the homeland.  

41. Activities aimed at improvement of the social protection system will be geared at improvement of the effectiveness of current systems (including improvement of the targeting) and creation of the basis for financial stability in the long‐term, ensuring provision of comprehensive social guarantees, essential reduction of social risks and reduction of poverty. At the same time, activities will be implemented in the medium term to gradually transit from delivery of primarily monetary social aid to vulnerable population groups to provision of needs‐based complex packages of social assistance.    Implementation of the program will guarantee for each member of the society the strong feeling of being protected and socially secured by the own state.   

42. Activities aimed at institutional modernization of the public administration system will adhere to the adopted fundamental policies and will be geared at improving the public efficiency, growth of public resources and their targeted use, improvement of service quality and accessibility, reduction of corruption, transparency of decision‐making, and increased civil society participation in these processes.

4. ADS MAIN OBJECTIVE, POLICY DIRECTIONS AND TARGETS

43. The main objective of the ADS is increase in employment through creation of quality and well‐ paid jobs.  

44. Employment increase will be the measurable outcome of implementation of the sustainable economic growth policy.   Policies ensuring sustainable economic growth, which creates new quality jobs, have systemic nature, i.e. they will flow from the priority of the primary objective by promoting its achievement or at least not hampering it.     

45. Highlighting the importance of framework policies aimed at main program objective, they will be complimented by financial, credit and monetary tools geared at increase of jobs and reduction of unemployment.     

46. In monetary policy these tool will be aimed at increasing accessibility and affordability of borrowings.  

47. Along with framework policy aimed at increase of the country’s international competitiveness, as well as improvement of business environment and investment climate, a special importance will be given to modern industrial and export with direct interventionist elements aimed at job creation.

48. When designing such policies sector specifics and conditions of job creation will be taken into consideration. Particularly the policy will differ based on labor‐intensive and modern academic sectors. Special emphasis will be placed on regional specifics of employment which will be viewed within direct regional development intervention mechanisms.

49. Unlike the previous economic development phases, when economic growth was ensured mainly due to work productivity increase, the planned activities will result in the following picture: during 2014‐2025 in non‐agriculture sector of economy about 4/5 of percentage point of economic growth will be ensured through productivity and 1/5 through employment growth. In industry, which will be the one of the main sectors contributing to increase in employment, the growth proportions will be 3/4 and 1/4, correspondingly.  

50. As a result of the implemented activities it is expected to achieve the following targets of employment growth in non‐agriculture sector:  

Employment growth of around 60 thousand by 2017 vs. 2012,

Employment growth of around 135 thousand by 2021 vs. 2012, and

Employment growth of around 220 thousand by 2025 vs. 2012.

51. In addition to employment growth, an increase in formality of non‐agriculture employment is envisaged as well, which is planned to reach 78% in 2017, 80% in 2021, 83% in 2025, as compared to 73% recorded in 2011.  

52. Apart from employment growth, the program envisages also employment structure changes (Figure 1) due to the fact that around 50% of employment growth will be assigned to industry and construction sectors. As a result it is expected that in 2025 the share of industry in non‐ farm employment will increase by around 3.5 percentage points as compared to 2012, and will   make up 22.4% and the share of construction will increase by 2.5 percentage points reaching 12% in 2025.

Figure 1. See PDF for full details.

53. Expansion of jobs in industry will be ensured mainly by creation of quality jobs, characterized as above‐medium productivity and salary job places.   

54. Expansion of jobs in construction will be ensured through recovery of economic growth in the sector (in average, 6.0‐6.5% annually), as well as framework policy promoting increase of employment formality and reduction of shadow activity in the sector.  

55. As for employment in the services sector, here also absolute employment increase is expected, though at a slower rate, which will reduce the share of employment in services in the structure of non‐farm employment. Projections of such developments are explained with the fact that along with sectors that have big potential of growth and expansion in the services sector (in particular, information technologies and tourism infrastructures) there are sectors with employment surplus as well.   

56. Viewing employment growth as the main socioeconomic development objective for the coming years, the income policy actions and measures will be designed with the logic, that salary increase should not exceed the productivity increase, thus not allowing increase of the unit labor costs4 , which is critical for the increase of the country's international competitiveness.   

57. At the same time, the minimum salary acierated increase policy will be implemented, one of the main goals of which is drastic reduction of working poor. This policy will result in net minimum to average salary ratio sharp growth, reaching around 40 % in 2014 (versus 26.8% in 2012) and this level will be retained until 2025. With planned increase by 2017 net minimum salary will make up around 160% of the upper poverty line, reaching 240% in 2025 as compared to 88% in 2012.

III. MACROECONOMIC FRAMEWORK

5. 2008‐2012 MAIN MACROECONOMIC DEVELOPMENTS  

58. The actual developments of macroeconomic indicators, particularly the rates of economic growth, have significantly deviated from the scenario forecasted for macroeconomic indicators by the Sustainable Development Program, which is largely result of the impact of the global financial and economic crisis of 2008. In Armenia, as well as numerous other countries, development programs were replaced by anti‐crisis programs because of the uncertainties of medium‐term and long‐term forecasts. Already in 2009, the application of the principle of following MTEF and long‐term development programs, which was exercised for a continuous period not only in Armenia, but also in a number of other countries, was temporarily halted. Formerly, prominent international organizations revised their short‐term economic forecasts 1‐2 times per year, while in 2009 those organizations revised their forecasts repeatedly.

59. The considerable worsening of the global economy had a negative impact especially on countries with open economies, including Armenia. The main reason behind the relatively deeper decline in Armenia were the specific structural characteristics of economic growth in Armenia ‐ the high rates of economic growth in 2000‐2008 were the result of the unprecedented growth of non‐export sectors, specialty construction, which was the result of the sharp increase in capital inflow into Armenia and concentration of the capital in the construction sector. The evidence proving that fact is that 10.5 percentage points of the 14.1 percent decline recorded in 2009 was the share of the construction sector. But it is important to note that regardless of the serious decline recorded in 2009, it was possible to avoid macroeconomic destabilization in the post crisis period due to the coordinated monetary and fiscal policies, and economic growth tendencies were recorded already in 2010‐2013. Characteristically, the structure of economic growth considerably improved as well with a larger share of export sectors, which will give a new quality and sustainability to the formation of future economic growths. Nonetheless, it must be noted that after the crisis and high rates of economic growth, the Armenian economy was naturally make the transition to lower rates of economic growth, which will nevertheless be of higher quality and more resistant to shocks, which is very important considering the uncertainties of current global economic developments.

60. The above mentioned characteristics of economic development are reflected in the development of different sectors of the economy, as well as directions of the enacted macroeconomic policy.

5.1. THE REAL SECTOR

61. In the pre‐crisis period of 2003‐2008, an average annual economic growth of 12 percent with the participation of all the main sectors of economy was recorded in Armenia, but the main contribution to the GDP was made by non‐export sectors of the economy6 at an annual average of 8.3 percent. As a result, in 2003‐2008, the share of non‐export sectors of the economy significantly increased in the structure of the GDP ‐ rising from around 47 percent of the GDP to 59 percent. However, during the crisis and the following years, the structure of economy was adjusted and the share of export sectors of the economy increased. In 2009, an unprecedented high rate of economic decline was recorded in Armenia at 14.1 percent, and later in 2010‐2013 growth rates were recorded in the economy at an average of 4.4 percent, which was a modest, but qualitatively different growth compared to the pre‐crisis era and was characterized by the relatively higher diversification of structure of economy. 

62. The share of the construction sector in the GDP increased and reached 25.3 percent in 2008, with an accelerated increase of the share in GDP (on average 26 percent in 2003‐2008). The unprecedented growth of construction in the pre‐crisis period was mainly due to private investment, especially the increase in the volume of housing construction. The reason behind the construction boom was monetary transfers from abroad and, in parallel, the higher rates of increase in savings of the population compared to previous years. Naturally, because of the significant decline in monetary remittances in 2009, the construction sector recorded a serious drop of 41.6 percent. After the crisis, the construction sector did not recover its former high levels and as of 2013 continued to decline. Thus, during 2010‐2013 construction sector declined on average by 4.2 percent annually. As a result, the share of construction in GDP in 2013 was 10.3 percent. But characteristically, after the crisis, despite the decline in private housing construction, the share of industrial construction aimed at the real sector improved and recorded a growing trend.  

63. The share of services in the GDP in 2008 amounted to 33.7 percent because of the high level of demand for services in the preceding five years, which, in its turn, was the result of the high rate of growth of incomes. In the pre‐crisis period (2003‐2008), the average growth rate of the sector amounted to 12.2 percent, which was mainly the result of growth in non‐export subsectors – trade, transport and communication, as well as the financial mediation sector. The decline in services during the crisis was relatively modest at 3.3 percent and was mainly impacted by trade, transport and communications subsectors. In 2010‐2013, services increased on average by 5.1 percent, serving as one of the engines for GDP. In 2010‐2013 as well, the growth in services was based on the above‐mentioned subsectors, but compared to the pre‐crisis period, the role of trade declined and the contribution of services related to export in the total growth of the services sector increased to some extent. 

64. The industrial sector had the smallest share in the GDP in 2008 (the average growth in 2003‐ 2008 amounted to 3.8 percent), which was the result of a number of factors. First, during the economic upturn in 2006, the industrial sector had a 2.5 percent decline, the main cause of which was the 11 percent decline in the production volumes of electricity, gas, water and steam, as well as the decline in the production volumes of processing industry subsectors, in particular chemical production, diamond processing and tobacco production. In addition, the growth of the industrial sector throughout the mentioned period was stifled due to the unfavorable export price environment. During the crisis, the industrial sector had a 6.9 percent decline, mainly as a result of the reduced demand in the global and domestic markets and the decline in foodstuff and construction material productions. After the crisis, growth in foodstuff and beverages production, as well as mining and metallurgy, contributed to the industrial growth, which was impacted by the anti‐crisis    policy implemented by the government, creation of a relatively favorable price environment for exports (currency exchange rate and international prices of raw materials), and the global economic recovery. Characteristically, the share of industry in GDP in 2011 amounted to 17.1 percent, compared to the 14.2 percent planned by the Sustainable Development Program for that year, whereas in 2013 it reached 17.4 percent.  

65. The share of agriculture in the GDP in 2008 was small and exceeded only the share of industry. In the preceding period, the growth of the sector (on average 7.4 percent in 2003‐2008) was the result of higher intensity in the sector and natural climatic conditions. During the crisis, agriculture was the only sector recording a growth rate (6 percent). However, 2010 was a turnaround year for agriculture because of the unfavorable natural climatic conditions, as a result of which the sector recorded a decline of 16 percent, mainly because of the decline in the crops farming subsector. In 2011, the sector began to recover as a result of favorable natural climatic conditions in the number of programs implemented by the government8 and made the highest contribution to the economic growth. The sector continued to grow in 2012‐ 2013, and the value added of the sector increased on average by 8.8 percent annually with respect to the preceding year. The share of agriculture in GDP in 2011 amounted to 20.3 percent, compared to the 14.2 percent planned by the Sustainable Development Program.  

66. Under the above‐mentioned pre‐crisis developments, the accelerated growth of the construction sector and the high initial share of the services sector in the GDP had resulted in reduced shares of the industrial and agricultural sectors in GDP. After the crisis, the structure of economy changed. The construction sector, which was the main engine of economic growth in the preceding period, shrunk and state continues to shrink as a percentage of GDP. As a result, in 2010‐2013, the contribution of sectors with better perspectives and export potential to the GDP increased, and the share of construction declined by 15 percentage points compared to the level in 2008 and amounted to 10.3 percent.

67. As a result of the high rates of economic growth and large volumes of remittances received from abroad, changes had taken place in the ratio of consumption and savings in the pre‐crisis period, national savings were increasing, the major part of which, basically bypassing the financial sector, became investments. In those conditions, the volumes of especially private investments were increasing, including investments in the housing construction sector. As a result, the share of investments and national savings in the GDP increased in 2008 amounting to 41 percent and 32 percent respectively. During the crisis, the share of investments in the GDP declined sharply mainly because of the decline in the volume of private monetary remittances, and national savings declined even to a larger extent. In 2010‐2013, investments continued to shrink parallel to the decline in the volumes of housing construction. National savings have also declined compared to the pre‐crisis period, but certain improvement is noticed since 2011.  

68. As a result of the mentioned economic development trends, the per capita GDP in US dollars in 2008 amounted to 3606 US dollars, compared to 740 US dollars in 2002. But it declined sharply in 2009 and started to recover gradually in the post‐crisis period – 3,447 US dollars in 2013.