Armenia Banking and Insurance Sector: Key Issues and Recommendations for Development

Abstract

This paper analyzes some major developmental issues in the specific areas of the Armenian banking sector (particularly raised by the Armenian authorities) and insurance sector and provides recommendations for addressing those issues. The paper argues that over the past seven years, the Armenian economy has been improving. GDP growth rate increased at a stable pace from 3.3 percent in 1999 to 6.0 percent in 2000, 9.6 percent in 2001, and 12.9 percent in 2002. Such robust economic growth provides opportunities and a good environment for financial sector development. The paper also argues that the Armenian authorities should promote the financial sector development. Although Armenia's economy has made good progress, its financial sector is still underdeveloped. The ratio of Armenia's financial sector (which is dominated by the banking sector) assets to GDP ratio is one of the smallest in the ECA region. Consequently, it is critical to examine the Armenian financial sector and address the obstacles to its development so that the momentum of the Armenian economic growth can be sustained.