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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Armenia has been growing at a fast pace in recent years. Expatriate remittances, an increase in international copper prices, and a business-friendly monetary policy aided the country's economic development. Other strengths include major mining resources (molybdenum, zinc, copper, gold), financial support from international organisations, considerable foreign exchange reserves, and membership in the Eurasian Economic Union (EARU) as well as a partnership with the EU. However, the economic crisis caused by the Covid-19 pandemic and the armed conflict with Azerbaijan over the Nagorno-Karabakh enclave severely reduced growth to a negative rate of 7.6% of GDP in 2020, reflecting the reliance on remittances. According to the IMF's latest estimates, GDP returned to growth in 2021 (+6.5%), driven by private consumption (about 80% of GDP), thanks to an increase in household income and remittances. Growth is expected to stabilize around 4.5% this year and the next (IMF).

According to IMF data, public debt represented 62.2% of GDP in 2021, much higher than the pre-pandemic level (50.1%). As the economy recovers, the ratio should gradually decrease to 60.1% this year and 58% in 2023. Despite the recovery in domestic activity, the budget deficit moderated only marginally in 2021 (-5.3% of GDP), thanks to robust exports and remittances. Inflation has been rising rapidly since the end of 2020 and stood well above the target of 4% (6.9% - IMF), due to the impact of the depreciation of the dram and the rise in commodity prices. Consequently, the CBA's key interest rate reached 7.25% in September 2021, marking an increase of 300 basis points since December 2020. This should contribute to a marginal decrease in 2022 (5.8%) and 2023 (4.6% - IMF). Economic challenges include low agricultural yields, dependence on Russia for exports and remittances, rising inflation, and high oil prices. Other significant challenges include geographic isolation, lack of infrastructure and a highly dollarized economy.

The unemployment rate increased to 18.5% in 2021. The IMF expects the unemployment trend to decrease slightly to 18.3% in 2022 and 17.8% in 2023. The latest figures from the World Bank show that the national poverty rate is estimated at 44%, while the GDP per capita (PPP) stood at USD 13,638 as of 2021.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 13.62e12.6413.6115.0616.16
GDP (Constant Prices, Annual % Change) 7.6e-7.4e6.54.54.4
GDP per Capita (USD) 4,5974,267e4,5955,0835,453
General Government Gross Debt (in % of GDP) 50.163.5e62.260.158.0
Inflation Rate (%) 1.41.2e6.95.84.6
Unemployment Rate (% of the Labour Force) 18.318.018.518.317.8
Current Account (billions USD) -1.00-0.48-0.39-0.60-0.80
Current Account (in % of GDP) -7.4-3.8e-2.9-4.0-4.9

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

Armenia's economy is based on agriculture, mineral exploitation, hydroelectricity, telecommunications, jewellery, and tourism. Agriculture represents 11.2% of GDP and employs 24% of the total workforce (World Bank, latest data available). Armenia suffers from low levels of cultivation of arable land, limited resources and low growth potential due to political instability. Small and fragmented plots are used for subsistence agriculture. Main crops include potatoes, tomatoes, grapes, wheat and melons, cotton and tobacco. Armenia's livestock sector is also pivotal, representing almost 40% of the country’s gross agricultural product. The latest figures from FAO show that the 2021 total cereal output was forecast at about 208,000 tonnes, almost 30% below the average level; with the production of wheat (at about 120,000 tonnes) well below the five year average. This was due to a gradual reduction in planted areas that almost halved since 2015.

The industry contributes 27% of GDP and employs 17.5% of the total workforce. Armenia has copper, molybdenum, bauxite, zinc, lead, iron, gold, and mercury deposits, the basis of the country’s chemical industry sector and its main exports. The mining sector is one of the largest contributors to GDP and exports (especially metal ores). Hydroelectricity is very well developed in the country, to the point that Armenia is now exporting it (although most of it is foreign-owned). The manufacturing sector alone accounts for 12.4% of GDP (World Bank). According to official government data, the industrial output in January-November 2021 grew by 2.7% year-on-year to a little more than AMD 2.1 trillion.

Services represent 53.2% of GDP and employ 51.2% of the active population. The sector includes jewelry (particularly because of the size of its diamonds) and tourism. Banking, in particular, has grown: it is considered a solid and stable sector and is composed of 17 commercial banks (European Banking Federation). As the Covid-19 pandemic has severely affected the tourism sector, the EU announced a call for proposals to support Armenia's tourism industry. Nevertheless, the number of foreign tourists visiting Armenia in the first half of 2021 dropped to 239,263 from 307,590 who had visited the country in the same period one year earlier, according to the latest figures by the National Statistical Committee (NSC).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 24.0 24.8 51.2
Value Added (in % of GDP) 11.7 26.4 53.3
Value Added (Annual % Change) -4.0 -2.2 -9.1

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Armenian Dram (AMD) - Average Annual Exchange Rate For 1 USD 480.49482.72482.99480.40489.01

Source: World Bank - Latest available data.

 

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Foreign Trade

Foreign trade in Armenia represents 70.1% of GDP (World Bank, latest data available). The country follows an open and liberal policy in regard to international commerce. Overall, minerals represent more than half of total exports. Main export commodities include copper ores, gold, cigars, and alcohol. Armenia mainly imports petroleum gases and oils, medicaments, radio-telephony transmission tools, and diamonds.

Armenia's main export partners are Russia (26.2%), Switzerland (18.1%), China (11.5%), Iraq (6.5%) and Bulgaria (6%). The Russian Federation is also the main import partner (32.7%), followed by China (14.5%), Iran (6.9%), Belgium (5.2%) and Turkey (5%). The country has been searching for new energy sources, especially after the Russian-Georgian conflict, which temporarily disrupted its hydrocarbon supply and revealed the country's energy vulnerabilities. Tensions remain with a couple of its neighbouring countries, such as Azerbaijan and Turkey, and have an impact on trade. Armenia's closeness with Russia and its adhesion to the Eurasian Economic Union limit the country's ability to further integrate with the EU (that considered as a whole is the country’s main export destination).

The country has a structural trade deficit, which was estimated at 9.9% of GDP in 2020 (World Bank). According to figures by WTO, in 2020, Armenia exported goods with a total value of USD 2.5 billion (-3.6% year-on-year), while it imported goods with a total value of USD 4.5 billion (recording a contraction of 17.3%). With regards to services, the country exported USD 1 billion worth of services in 2018, while it imported USD 947 million (-55% and -60.7% vis-à-vis one year earlier, respectively). According to the latest figures by the National Statistics Committee (NSC), exports from Armenia in 2021 grew by 19.1% to USD 3.022.4 billion (driven by the good performance of gold and copper ores), with imports growing at a slower pace (+16.9% - at USD 5,356.8 billion).

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 3,2934,1894,9635,5144,559
Exports of Goods (million USD) 1,7832,2452,4122,6402,544
Imports of Services (million USD) 1,7341,9212,1252,414947
Exports of Services (million USD) 1,6101,8802,1742,3851,076

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 76.187.292.595.770.1
Trade Balance (million USD) -977-1,401-1,759-1,805-1,327
Trade Balance (Including Service) (million USD) -906-1,241-1,702-1,829-1,180
Imports of Goods and Services (Annual % Change) 6.324.613.312.0-32.1
Exports of Goods and Services (Annual % Change) 21.319.35.016.0-31.4
Imports of Goods and Services (in % of GDP) 42.349.053.154.539.3
Exports of Goods and Services (in % of GDP) 33.738.239.441.230.7

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) -4.113.910.16.05.9
Volume of imports of goods and services (Annual % change) -0.913.911.05.85.4

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Among others, Armenia is member of the Commonwealth of Independent States (CIS), of the Conference on Security and Cooperation in Europe (CSCE), of the World Bank etc.  
 

Main Partner Countries

Main Customers
(% of Exports)
2020
Russia 26.2%
Switzerland 18.1%
China 11.5%
Bulgaria 6.0%
Netherlands 3.9%
See More Countries 34.3%
Main Suppliers
(% of Imports)
2020
Russia 32.7%
China 14.5%
Germany 5.2%
Turkey 5.0%
Italy 4.2%
See More Countries 38.3%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Armen SARKISSIAN (since April 2018) - Republican Party
Prime Minister: Nikol PASHINYAN (since 10 September 2021) - Civil Contract
Next Election Dates
Presidential: February 2025
National Assembly: June 2026
Main Political Parties
There are numerous political parties in Armenia. The main parties/alliances are:

- Civil Contract party: liberalist, reformist. It obtained 71 seats out of 107 in the latest 2021 elections
- Armenia Alliance: nationalist, pro-Russia. It has 29 seats in the National Assembly
- I Have Honor Alliance: nationalist, pro-Russia, it consists of the Republican Party of Armenia (right-wing, national conservative party) and the Homeland Party. The alliance obtained 7 seats in the latest election

Other parties include:

- Prosperous Armenia (BHK): centre-right, it is the main opposition party
- Hanrapetutyun Party: conservative, pro-European
- Armenian National Congress: social liberalism, pro-European.

Executive Power
The President of Armenia is the chief of the state and holds the highest executive powers. He is indirectly elected for a 7-year term.
The Prime Minister is the head of government and holds most of the executive power. He is elected by majority vote by the National Assembly.
Legislative Power
The legislative branch in Armenia is composed of a unicameral National Assembly (Parliament). Members are elected in single-seat constituencies by proportional representation vote for a five-year term. The minimum number of seats is 101, currently there are 107 members.
 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Armenia, please visit official portal of the National Center for Disease Control dedicated to the epidemic (in Armenian). Daily updates in English can be found on the website of the Ministry of Health.
For the international outlook you can consult the latest
situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures

On March 16, 2020, Armenia declared a state of emergency, which was extended until May 14, 2020. Measures include school and university closures, travel bans on foreign citizens from high risk countries, strict quarantine measures and restrictions on movement and public transport.
For a list of the temporary restrictions on the different types of economic activities, click here (in Armenian), whereas the official portal of the National Center for Disease Control provides information on the sanitary measures to take in order to avoid infections.

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.

Import & export restrictions

For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the portal of the Armenian Customs Authority. The country implemented restrictions for medical supplies and equipment.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Armenia on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan
To know about the economic measures taken by the Armenian government to address the impact of the COVID-19 pandemic on the national economy, please visit the dedicated page on the official governmental portal. Furthermore, the government released a set of measures to address the social impact of COVID-19.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the
Armenian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Armenia in the IMF’s Policy Tracker platform.
Support plan for businesses

For the information on the local business support scheme and taxation measures established by the Armenian government to help businesses to deal with the economic impacts of the COVID-19 epidemic on their activity, please refer to the dedicated page on the government’s portal. Specific measures to help SMEs can be consulted here.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters

At the moment the official government sources do not provide any information on the specific programs for Armenian exporting companies put in place by the national government following the COVID-19 epidemic outbreak. For updated information please consult the official governmental portal.

 

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