Kavkaz Files ISSN 2975-0474 Volume 24 Issue 5
Author: Giuliano Bifolchi & Silvia Boltuc
Since acquiring independence, Armenia’s economy has undergone substantial transformation. Initially burdened with the remnants of an inefficient Soviet economic system, Armenia faced severe challenges such as high inflation, a decline in GDP, and limited natural resources.
The geographical position and lack of fertile land exacerbated these difficulties. However, today, the country has diversified its GDP across agriculture, industrial production, trade, construction, and transportation. Armenia’s leading industries include mechanical engineering and food processing, highlighting a substantial shift from its earlier economic instability.
The South Caucasus republic’s economic structure is regionally diverse, with five distinct regions each specialising in different industrial activities. Major industrial hubs such as Yerevan, Gyumri, and Vanadzor play pivotal roles in the country’s economic landscape. Exports, including processed brilliants, machinery, and copper ore, contrast with imports like gas, oil, and foodstuffs. Challenges such as low investment rates, limited human capital, and the impact of climate change, compounded by the recent influx of displaced persons from Nagorno-Karabakh, underscore the ongoing obstacles Armenia must navigate.
During the official visit to Yerevan, SpecialEurasia discussed the country’s economic performance with the Minster of Economy of the Republic of Armenia, Gevorg Papoyan, with the ultimate goal of assessing local investments and trends and understand future opportunities and challenges for this South Caucasian republic.
Could you share the latest developments in the Armenian economy?
“Economic growth is expected to continue and advance further in 2024. At the end of the first quarter of 2024, GDP growth reached 9.2%, with all major sectors of the economy contributing positively.
I believe that, given the expected external economic environment, the continuation of positive developments in the world economy, and the policy measures aimed at enhancing economic potential and growth as outlined in the RA government’s 2021-2026 plan, achieving the targeted 7.0% economic growth in 2024 is quite realistic.
It is necessary to note that the economic activity rate in January-April 2024 (13.2%) was higher than the annual rate in 2023 (9.8%).
In 2024, indicators characterizing foreign economic activity have continued to grow. For instance, in January-April 2024, exports of goods increased by 180.0%, and imports rose by 110.0%, indicating the effectiveness of the measures being implemented in the direction of foreign economic policy.“
In what ways has the relatively flexible dram exchange rate contributed to economic stability and growth in Armenia?
“Currency stability in any country positively affects economic growth, public behavior, and the business environment. A stable exchange rate fosters confidence in the future, which in turn positively influences decision-making processes.
In the first half of 2024, the Armenian dram remained relatively stable against the US dollar, euro, and ruble. Overall, there was a moderate devaluation of the dram against the currencies of major partner countries, with the dram strengthening by about 4% against the US dollar since mid-March 2024.
The relatively flexible exchange rate of the Armenian dram positively impacted consumer prices, which is crucial for the purchasing power of the population. As a result, the consumer price index for January-May 2024 was -0.8%.“
How is Armenia leveraging its significant mining resources to strengthen its economy, and what are the prospects for further development in this sector?
“Armenia leverages its mining resources to strengthen its economy, with a primary focus on exports. The country boasts substantial reserves of gold, copper, molybdenum, and other metals, which are exported to international markets, generating significant revenue. The adoption of new technologies and partnerships with international companies enhance the efficiency of the industry and attract foreign investment.
Looking ahead, continued development and exploitation of these resources are expected. However, the sector faces challenges related to environmental concerns and price fluctuations in international markets. For sustainable development, it is crucial to implement innovative environmental solutions and establish a stable regulatory environment. This will encourage international investors and contribute to the long-term success of the sector.“
What progress has been made in Armenia’s efforts to reform corruption, justice, and competition, and how are these reforms expected to impact the country’s economic landscape?
“Armenia has made significant progress in recent years with reforms targeting corruption, justice, and competition. In the fight against corruption, the establishment of specialized bodies such as the Commission for the Prevention of Corruption, the Anti-Corruption Committee, and specialized anti-corruption courts has been pivotal. These entities actively work to identify and punish cases of corruption.
To ensure fair competition, Armenia has enacted laws and regulations promoting a free and fair market. The Competition Protection Commission of Armenia continuously works to regulate the market and combat monopolies. These measures contribute to a healthy competitive environment, stimulating dynamic economic development.
These reforms have profoundly impacted the country’s economic landscape. Reducing corruption and improving the justice system boosts foreign investors’ confidence, encouraging investment. Promoting competition fosters the creation of new businesses and drives economic growth. Overall, these reforms create a more favorable and stable economic environment, which can significantly improve Armenia’s economic situation in the long term.“
Considering Armenia-Russia relations in trade, how have Western sanctions affected the Armenian economy, and what strategies are being implemented to address these impacts?
“Trade relations between Armenia and Russia significantly impact the Armenian economy, and Western sanctions against Russia have created certain challenges for Armenia. However, we are developing strategic steps to ensure long-term economic stability by increasing economic resilience and diversification.
The Armenian economy is focused on diversification. This means we aim to connect with the entire world, deepening economic relations not only with the EU and the US but also with other regions, including the Middle East and Arab countries. In this context, we are actively working and negotiating with different countries and developing various economic programs. These efforts are aimed at gaining access to new markets and finding alternative export destinations to replace Russia.“
If you require additional information, reports, or consulting regarding Armenia, please do not hesitate to contact us at info@specialeurasia.com.
