Coface Group


Population 2.9 million
GDP per capita 3 520 US$
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major macro economic indicators

  2014 2015  2016 (f) 2017 (f)
GDP growth (%) 3.6 3.0 3.2 3.4
Inflation (yearly average) (%) 3.0 3.7 -0.5 2.5
Budget balance (% GDP) -1.9 -4.8 -4.5 -3.0
Current account balance (% GDP) -7.6 -2.7 -2.5 -3.0
Public debt (% GDP) 41.4 46.9 50.6 51.6


(e) Estimate (f) Forecast


  • Considerable mining resources (molybdenum, copper, gold)
  • Significant support from international organisations and the diaspora
  • Member of the Eurasian Economic Union (EEU)


  • Geographic and political isolation exacerbated by an infrastructure deficit
  • Heavily dependent on Russia (trade, FDIs, credit, migrant remittances)
  • High and persistent level of unemployment
  • High level of corruption
  • Conflict with Azerbaijan over the Nagorno-Karabakh question sur
  • Stalled diplomatic relations with Turkey


Armenia's economy is resistant to the regional context

Unlike that of its Russian and Azerbaijani neighbours, Armenian growth did not contract in 2016. In 2017, it will remain moderate. It held up well, thanks in particular to its robust mining sector and manufacturing industry. The increase in mining output, in general, and of copper, in particular, is expected to continue in 2017, buoyed by a slight rise in copper prices which have been falling since 2011. Moreover, the start of exploratory drilling as part of the Amulsar project should help increase gold output in 2017. The devaluation of the dram in November 2014 also helped sustain mining exports, which make up over half of total exports. Despite a positive trend, the pace of growth will remain less buoyant than during the 2000-2013 period (average of around 7%). The recession in Rusia is partly responsible for this slowdown. Indeed, it is a major source of revenue for Armenia, in the form of expatriates' remittances,which decreased by about 40% between 2014 and 2016 and are critical to supporting household consumption (around 80% of Armenian GDP). The expected return to growth in Russia should, therefore, be synonymous with increased remittances to Armenia. The economy will, however, still suffer from major structural issues. Infrastructure deficiencies and lack of competition on the domestic market, institutional weakness and high and persistent levels of unemployment (around 18%), as well as the degraded business climate, are among the most important sources of vulnerability.

Inflation will no longer be negative in 2017, thanks specifically to stronger domestic demand, , higher prices for food  and commodities, as well as an easing of the monetary policy of the Central Bank of Armenia, which cut its key rate by 225 basis points (from 8.75% to 6.5%) in 2016.


Fiscal consolidation and stabilisation of the current account deficit expected in 2017

The fiscal deficit is expected to narrow in 2017 thanks to the government's fiscal consolidation efforts. Begun in 2016, these efforts are focused on making the fiscal system more efficient and improving tax collection, rather than on cutting spending. Accordingly, a new Fiscal Code was passed by Parliament in 2016, which provides for several measures to  improve tax collection and which is expected to increase tax receipts in 2017. The government is also planning to limit non-priority spending, in particular social and infrastructure spending. Itis not expected to increase wages or pensions in 2017 in order to ensure the sustainability of the public debt which will continue to rise as a share of GDP, although at a slower pace.  

After a substantial reduction in the current account deficit in 2015, with the reduction in imports and the trade deficit, a stabilisation was observed in 2016. In 2017, the trade balance will widen under the impetus of the improved Russian economic situation. This is because inititally, expatriates' remittances are likely to boost consumption and investment and in turn the price of imported goods. Moreover, the effect of joining the Eurasian Economic Union (the price of imports rose significantly before sharply plummeting)  is expected to fade and thus drive up imports. The rise in imports will prevail over the positive contribution made by the increase in remittances to the current account balance.


Persistent political instability and tensions in Nagorno-Karabakh

President Serzh Sargsyan's second term has been marked by persistent political instability,  as reflected in the replacement of Hovik Abrahamyan in September 2016. This came after a hostage crisis at a police station during which two policement were killed, responsibility for which was claimed by a group calling themselves the Sasna Tsrer which supports the New Armenia Public Savation Front (NAPSF). The hostage-taking was in revenge for  the imprisonment of Jirair Sefilian, leader of the NAPSF, suspected of planning an armed coup d'Etat.  The armed group enjoys popular support in a context of general dissatisfaction with the President and his government. Widespread corruption, persistent unemployment levels and growing inequalities are among the grievances cited by the leaders of Sasna Tsrer and which strikes a chord with a population already aggrieved by electricity price increases in 2015. The tensions between the president's Republican Party (RP) and the opposition groups are expected to remain high in the run up to the parliamentary elections in 2017 and the presidential elections in 2018. Despite the protests, the RP, which won 70% of the votes cast during the 2012 parliamentary elections, is not expected to lose its grip on parliament next April. The 2018 presidential elections do not gurantee a change either: Serzh Sargsyan who will step down at the end of his second and final term could stand for the position of prime minister as a way of holding onto power.

Regionally, the dispute with Azerbaijan over the territory of Nagorno-Karabakh saw an escalation in violence in April 2016 resulting in four days of clashes. Since then, tensions have calmed with help from Turkey,  which has good diplomatic ties with Azerbaijan, and from Russia, Armenia's partner within the EEU. Both neighbours want to calm the situation so as not to trigger a bigger conflict. The status quo is thus expected to prevail in the coming months, with some occasional skirmishes. The EU, the US and the OSCE are also calling for this Cucasian conflict to be settled.


Last update : January 2017

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