Policy Forum Armenia published a Special Report on “Armenia: Averting an Economic Catastrophe” warning that unless drastic changes in the economic policy direction and political-economy landscape are carried out, within the next 3 years, Armenia will be forced to undergo a large and painful devaluation of its currency, the dram, and/or an external sovereign debt restructuring or default.

The crisis in Europe will have serious implications for Armenia’s economy, both directly as well as indirectly through its impact on Russia, Armenia’s largest source of remittances.

A combined shock, with GDP decline and devaluation taken together will drive the debt-to-GDP ratio well over 70 percent, the report says.