Country Context

Armenia has experienced significant socio-political and economic shocks in recent years, including the 2018 Velvet Revolution, the 2020 twin shocks of the COVID-19 pandemic and military conflict with Azerbaijan in 2020, and the refugee crisis at the end of 2023. That sudden influx of refugees has placed new demands on the state, requiring the expansion of housing, jobs, social services, and psychological support. Despite this pressure, the economy has shown notable resilience, supported by prudent macroeconomic management, namely inflation targeting, fiscal responsibility, and sound financial sector oversight. 

Strategy

Recent Economic Developments

In 2024, GDP grew by 5.9%, driven by a 6.8% rise in private consumption and an 11% increase in investment. On the supply side, trade, real estate, financial services, and construction sectors saw growth of 17%, 19%, 18%, and 14%, respectively. However, mining contracted by 8.3%, and agriculture grew by only 1%. The unemployment rate rose to 13.9%, partly due to the influx of refugees not yet integrated into the labor market.

In 2024, average inflation decreased to 0.3%, compared to 2% in 2023, mainly due to 2% food deflation; however, price pressures increased towards the end of the year and continued into the first quarter of 2025. The budget deficit was 3.5% of GDP in 2024, with both current and capital expenditures underperforming against the budget plan. Government debt remained below the 50% threshold, at 48.3% of GDP.

In 2024, the current account deficit rose to 3.9% of GDP. Goods exports and imports surged by 53.1% and 33.7% respectively, reducing the trade deficit by 5.5%. However, service trade weakened due to a 4.7% drop in tourist arrivals, particularly from Russia (down 17.5%). Net non-commercial transfers fell by 35%. The Armenian Dram appreciated by 2% against the dollar.

Economic Outlook 

Growth is forecast to slow to 4% in 2025, then rise to 4.5% as domestic demand moderates and global trade policy affects Armenia. Inflation may increase to 3.5% in 2025 before stabilizing at 3%. The fiscal deficit could reach 5.3% of GDP in 2025 due to increased spending on defense, infrastructure, social security, and debt service, then fall to 3.8% by 2027. Public debt might grow to 56.6% of GDP by 2027. The current account deficit is projected to worsen to 4.9% of GDP by 2027 due to reduced export volumes and lower remittances.

Armenia's outlook faces downside risks, including geopolitical risks, a faster unwinding of re-exports, and challenges in integrating refugees. Should global growth and investor sentiment deteriorate more than anticipated, Armenia’s growth would further decelerate. On the upside, normalization of relations with neighbors could support growth and economic diversification.

Last Updated: Apr 24, 2025