Economic performance was mixed in 2013, as slower growth and higher inflation accompanied the marked narrowing of fiscal and current account deficits. The outlook is for higher growth, lower inflation, and further improvements in fiscal and external positions. Despite progress in structural reforms and an improved business environment, high unemployment remains a challenge.

Economic performance

Economic growth slowed to 3.5% in 2013 from 7.2% in 2012. On the supply side, industrial growth decelerated to 4.9% in 2013 from 7.0% in 2012, reflecting the adverse effects of steep price increases for electricity and imported gas in July 2013, partly offset by government efforts to stimulate export-oriented industries. Industrial growth came mainly from higher output in mining, quarrying, and the production of pharmaceuticals, food, and beverages.

On the demand side, consumption was the main driver of economic growth in 2013, as in the previous year. Growth in private consumption slowed to an estimated 2.8% in 2013 from 9.1% in 2012, as higher inflation reduced real income, despite continuing increases in workers’ remittances and bank credit. But public consumption jumped by an estimated 12.7%, versus a 0.2% decline in 2012, reflecting higher government spending.

Selected Economic Indicators (%) - Armenia 2014 2015
GDP Growth 4.6 5.0
Inflation 4.5 4.0
Current Account Balance (share of GDP) -8.7 -8.0

Source: Asian Development Outlook (ADO) 2014; ADB estimates.

Economic prospects

Growth is expected to accelerate to 4.6% in 2014 and 5.0% in 2015, with both projections subject to upside and downside risks.

The pace of growth depends on Armenia’s accession to the customs union and common economic space of the Russian Federation, Kazakhstan, and Belarus in 2015; accession was announced in September 2013, but the full implications will depend on the final agreements to be signed in mid-2014. While Armenia may benefit in the long run from higher trade in the enlarged market, lower nontariff trade barriers, more efficient flows of labor and capital, and potentially greater foreign direct investment, it remains to be seen how terms-of-trade changes will affect trade with countries outside the union.

Also likely to promote growth are domestic factors such as continued reforms in taxation, customs duties, and the business environment, along with air space liberalization introduced in 2013.

Source: ADB. 2014. Asian Development Outlook 2014. Manila.