From Surge to Stability: Armenia’s Economic Snapshot

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After two years of experiencing exceptional growth, influenced by the influx of Russian emigres, a construction boom, re-exports to Russia and a growing tech sector, Armenia’s economic trajectory is beginning to return to more realistic levels.

Meanwhile, Yerevan is pursuing an ambitious reform agenda, aimed at accelerating economic growth and attracting investment. 

In 2021, the government adopted a Five-Year Action Plan (2021-2026) focused on key areas including the IT sector, human capital development, and infrastructure. Despite some progress, gaps remain when it comes to building more inclusive and resilient growth across the country. 

“We’re still a very consumption-oriented economy,” says Samson Avetian, CEO at eqwefy, author, and adjunct lecturer at the American University of Armenia. 

Now, with just one year remaining in the Action Plan, Armenia’s government still has a number of key goals to accomplish, many of which will likely spill over into the next Five-Year Action Plan. 

The current program included 439 main goals ranging from strengthening security and foreign policy, boosting the economy, to enhancing infrastructure and strengthening institutions. 

Many of these goals closely align with the 2019-2023 and, more recently, the 2025-2029 World Bank Group’s Country Partnership Framework. The World Bank is working with the Armenian government to invest in strategies that move these goals forward, particularly in boosting economic growth and alleviating poverty. 

“That’s a lot of things to accomplish in the year,” says Carolin Geginat, who served as country manager for Armenia at the World Bank Group until July 1, adding that the government has to “pace itself” as it catches up with a backlog of investments following three decades of low funding in the country. 

Among the more prominent sectors pushed to the forefront is the information and technology sphere, which experts and government officials have identified as the country’s next big attraction. Tech exports, as a share of total service exports, more than doubled between 2017 and 2021 to 22%, according to the World Bank. 

Tech service exports on a per capita basis also outperformed those of China and India.

“In the long run, the most important sector is tech innovation,” Avetian says. “Without it, it would be very difficult to imagine a wealthy, sustainable economy in Armenia.”

In early June, a $500 million public-private partnership between the Armenian government and Firebird AI was announced, with support from NVIDIA. Armenian Prime Minister Nikol Pashinyan described this latest investment as the “Stargate” of Armenia. In February, the Ministry of High-Tech Industry also signed a partnership with French AI company, Mistral, to strengthen AI infrastructure and integrate the technology within the government. 

The World Bank’s newest framework encourages Armenia’s continued diversification, especially of its export products. Again, the emphasis is on tourism, IT and agriculture as the sectors with the most potential. 

Around 2.2 million tourists visited the country in 2024, significantly surpassing pre-COVID numbers of 1.9 million in 2019. Early numbers from the Ministry of Economy report over 383,000 tourists have already visited Armenia between January and March of this year. 

There have also been large investments in the sector over the last two years. In 2023, the government invested 1 billion AMD or $2.6 million in tourism and 1.5 billion AMD or $3.9 million in 2024.

In April, the World Bank approved a $100 million project to improve access to resilient infrastructure and strengthen the role of tourism in the Armenian economy. The Tourism and Regional Infrastructure Project is expected to create job opportunities, attract private investments, and benefit local communities and visitors in seven prioritized areas across the country.

The Law on Tourism, which came into effect Sept. 1, 2024, and regulates the industry, requires all individuals providing tourism services and resources to electronically register with the Tourism Committee. It also places new requirements on tourism companies, such as having a website and at least one employee.

Armenia’s shift toward a more pro-business attitude has also proven beneficial for the encouragement of new startups in the country. In late December 2024, the government adopted a new bill to support new high-tech ventures. 

“There were some questions from the tech community or the tech associations in Armenia about how effectively the law achieves its intended goals,” Avetian says, noting that there are a few bottlenecks and practical hurdles regarding the applicability of some of those solutions. “But I think the orientation and the willingness to support that sector is visible.”

While there has been momentum in the tech industry, movement of labor or capital from the less productive firms to the more productive ones, also referred to as “factors of production,” continues to lag behind, according to the World Bank. Instead, large companies that have been active for a long time continue to possess the majority of the market share. 

“This is usually where growth comes from in countries,” Geginat says. “So a productive firm attracts small labor and then grows. There is still something missing in the Armenian economy there.”

The World Bank also reports some progress made in the fields of healthcare and education. Armenia has been working to create a universal health insurance system to tackle high health costs in the country, which has kept poverty rates high and productivity rates low in vast parts of the country. Out-of-pocket payments remain commonly high, with around half of the population relying predominantly on them, the World Health Organization reports.  

However, the program’s rollout has been delayed due to a lack of funding despite securing a loan from the World Bank. As of June, the government maintains that “very intensive discussions” on the legislative packages are ongoing, with an implementation date of 2027. 

A universal healthcare system would be “a game changer” for Armenia’s poverty and productivity rate, says Geginat of the World Bank.

“That affects the productivity of the nation, it affects immigration rates, it affects whether people go into retirement early, which is then a burden on the overall population because someone has to pay for their pensions,” she explains. “So that’s an important reform that I think has to be finalized in the next year.”

Education was also a key goal of Pashinyan’s government strategy. A new teacher recertification program allowed for educators to obtain high salaries, and a new curriculum program for teachers is currently being rolled out. However, initial reports show lower-than-anticipated participation rates in the program. 

But, reforms to the educational curriculum remain to be seen. Out of nearly 12 years of schooling in Armenia, only 8.5 translate into quality learning years, the World Bank reports. 

“This is not just Armenia, to be honest,” Geginat says. “We see this phenomenon around Eastern Europe. There needs to be investments in that space to prepare the new generation better for the labor market.”

Many of the policy changes related to education and health are long-term strategies that may not immediately render results that can be marked as a win, according to Avetian. 

“I’m not saying those policies that were implemented are bad,” he says. “I’m just saying those that were implemented were long-term policies and those are very important too.”

Despite some progress in various fields, some aspects of Armenia’s economy remain unbalanced. Manufacturing remains a small portion of the economy, despite its potential as an economic driver, Avetian says. Investments also remain lower than in many other countries. 

Geginat explains that investments have flowed mostly to the IT sector but have yet to manifest in job-intensive sectors like tourism and construction. FDI inflows as a share of GDP declined significantly during the past decade in spite of a competitive workforce. 

“The diaspora is a huge comparative advantage that Armenia has because they invest here and they often take risks that a foreign direct investor who doesn’t have the emotional ties with Armenia wouldn’t take,” Geginat says. “And that’s been a great source of resilience for the Armenian economy.”

Another challenge affecting Armenia’s economic potential is the persistent gender inequality in some areas, which is “a cost to the economy,” according to Geginat. Over 50% of women aged 25-29 are neither working nor studying. 

“All of that human capital that you have incorporated in these wonderful women in Armenia is not being used to boost the economy,” she says. 

While agriculture has been touted by the World Bank as a promising export sector for Armenia, it still faces significant challenges in meeting necessary standards, Geginat says. 

“Armenian products are usually produced just for the internal market or for Russia,” she explains. “So, in terms of standards, it needs to reach higher to be able also to be exported into other markets and reach that diversification.”

Farmers also have to prepare for “potential bigger competition coming from an opening of the borders” as Armenia continues to negotiate a peace treaty with Azerbaijan and explores renewed dialogue with Turkey, according to Geginat. 

Other areas identified for continued investments and growth include renewable energy, climate-resilient initiatives, and water infrastructure. The World Bank helped create the Lifeline Road Network Improvement Project to improve road accessibility in rural parts of the country. In the decade since its launch, over 900 kilometers of community roads have been newly built or rehabilitated.  

In terms of pollution, there remains an excess of industrial waste from the Soviet Union era to address, as well as tackling air pollution by cleaning the Nairit Industrial Plant in Yerevan, implementing air monitoring frameworks and reforesting the country.  

“A lot has happened in terms of moving important things forward and the agenda of putting money and financing to it, but the implementation is still to be done,” Geginat says.

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