EXTERNAL SOURCES OF INVESTMENT FINANCING IN THE REPUBLIC OF ARMENIA։ RISKS AND LIMITATIONS

Abstract

Economic growth requires investment that can be financed from both domestic and foreign sources and based on domestic and foreign savings, respectively. Developing countries with low savings levels turn to external sources of financing for domestic investment, which has often come with certain risks and limitations. The geopolitical and geo-economic events of recent years, which increased uncertainties, have led to new risks and restrictions on external sources of financing domestic investments, the study of which is important for national economies, including the economy of the Republic of Armenia in terms of readiness and adequate response to challenges.

The article attempts to reveal the risks and limitations associated with external sources of financing for investments in the RA, such as foreign direct investment. It was revealed that, although in 2021 global flows of foreign direct investment were restored to their pre-pandemic levels. Such a development did not occur in new industrial projects of developing countries, which also applies to Armenia.

It is concluded that the risks and restrictions associated with external sources of financing for domestic investment may create problems for further economic growth of the Republic of Armenia. Improving the competitive position of the RA in terms of attracting FDI during this period of radical restructuring of global supply chains was seen as a way to overcome risks and restrictions by increasing the country's technological absorptive capacity and promoting the formation of new sectors of the economy.