The mountainous small, landlocked country Armenia with 21 % of Gross Domestic Product (GDP) in agricultural sector consistently experiencing natural disasters (such as droughts, floods, storms, which are projected to occur more frequently in the future) is very vulnerable towards climate and its change. For this reason, estimation of agricultural resources of the country, their influence on agronomic production, crop vulnerability towards current and future climate, as well as assessment of economic loss of the agricultural crop production due to climate change are the main goals of the given study. The findings of the research will serve raising the crop production efficiency for a developing country, namely Armenia with specific economic structure and climatic characteristics. The interrelations between climate and harvest enable to develop effective crop management programs in dependence on climate change projections protecting the economy from large GDP losses. The GDP losses due to drought events, which damage agroeconomy to a large extent, have been evaluated and modeled for future having used the macroeconomic model evaluating demand and supply of winter wheat in dependence on climatic parameters (Melkonyan and Asadoorian, 2013). The study consists of three main parts. In the first part, crop productivity in dependence on climatic elements has been estimated. Data on air temperature, precipitation, relative humidity, atmospheric pressure, wind speed and direction for the period of 1966 – 2011 have been taken from 30 stations maintained in the measuring network of Armenian State Hydrometeorological and Monitoring Service (MES). Data on crop production for the time period of 1990 – 2010 were provided by the National Statistical Service of Republic of Armenian (NSSRA). Given the fact that the crop production process is very complex, it cannot be described by only the classical meteorological data. Important agricultural issues such as sowing and harvesting periods, forecast of the crop production for the next year or adaptation mechanisms, i.e. coverage and burial of crop during winter period against freezing, cannot be answered. Here the limiting factor is the absence of continuous measurements of crucially important parameters such as soil temperature and humidity at different depths, water content at field capacity, permanent wilting point, snow coverage, potential and actual evapotranspiration, stomata and stand resistance, leaf area index (Bannayan et al. 2011) especially in developing countries. The potential of all these meteorological elements influencing the efficiency of crop production is called agroclimatic resources (MES, 2011 b). To model the agroclimatic resources of Armenia AMBAV model (Agrarmeteorologisches Modell zur Berechnung der aktuellen Verdunstung) developed by German Meteorological Service in Braunschweig (Löpmeier, 1994) is applied. To generalize the dependence of crop sensitivity on meteorology and analyze crop production in an arid region of Armenia, drought indices are estimated in this study using the data of only temperature and precipitation, considering the fact that climate projections give reliable information only on these parameters for the future climate. After estimating the crop vulnerability on the complete agroclimatic resources, interpolation of these relations for future climate conditions using climate projections in the region for the time period of 2011 – 2040 has been carried out in the second part. Here climate of the entire region of the South Caucasus has been modeled firstly for the current situation with the mesoscale METRAS model (Mesoscale Transport and Stream) with 4 km and 12 km resolution. Later on, based on General Circulation Models (GCMs) climate projections for the near future (until 2040) have been realized showing significant increase in air temperature, but no reliable changes in precipitation sum, still dryness is obvious in the region. In the third part, the efficiency of agricultural production is discussed with the help of a macroeconomic model developed in the frames of this study. Economic welfare loss due to drought episodes is calculated using the economic data integrated with climate measures. Economic data are utilized for the period of 1995 – 2011 obtained from NSSRA and specifically include the quantity produced and consumed of wheat flour and bread combined with the mean prices, population income, GDP in the agricultural sector, GDP in the planting sector, and governmental expenditure on subsidies and irrigation. The economic analysis includes three main components. The first utilizes a market framework that analyzes the impact of climate on equilibrium prices and quantities as well as trade and tax effects (here only the market of the wheat flour and bread has been shown, but the model can be transferred into all the markets). The second employs a logarithmic utility function to estimate the effective insurance policy for the agricultural sector using risk management strategies. Lastly, a macroeconomic model has been developed to assess the efficient sum of governmental expenditure on subsidies and irrigation during drought episodes and during the mean climatic conditions. In summary, the main aim of the study is to improve the economic efficiency of agricultural production in a developing country, Armenia, characterized by a vulnerable economy towards climate and its change through investigating the linkages between agroclimatic and economical parameters.