Armenia's economic growth forecast: 8% with favourable conditions, 4% otherwise. Opinion

Armenia’s economy

“If the situation in Armenia develops positively, then in 2024 the country could anticipate economic growth ranging between seven to eight percent. But if not, it might only reach three to four percent,” economist Tatul Manaserian suggests.

The government believes it can achieve 7% economic growth. However, Manaserian reminds that when analysing the country’s economy, several factors should be considered, and not all of them may have a positive effect.

Among the positive ones, in his opinion, is the agreement to establish a free economic zone between Iran and the Eurasian Economic Union, which includes Armenia. Signed late last year, this agreement could bring real benefits to the Armenian economy in 2024, Manaserian thinks.

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The government expects a minimum of 7% growth

At the end of 2023, the finance minister stated that if current trends persist, growth exceeding 7% could be recorded.

Last year, the service sector and an unprecedented construction boom accounted for a significant economic growth.

However, experts warned that agriculture is in a dire state, industry is in decline, and the recorded economic growth in the country is not stable. If the external factors that led to the growth change, the country will face serious problems.

The Eurasian Development Bank forecasts economic growth in Armenia in 2024 at 5.7%, the International Monetary Fund at up to 5%. According to the World Bank’s forecasts, growth will be 4.7%, while UN experts estimate it at 5.2%.

The Central Bank of Armenia expects the country’s economy to grow by 6.1% this year. However, the government expects a higher result.

Commentary:

An economist Tatul Manaserian, the director of the research centre “Alternative”, believes that several conflicting trends may influence the development of Armenia’s economy this year.

“The main driving force could be the realisation of the country’s competitive advantages. Growth is possible through the utilisation of real opportunities arising from the establishment of a free trade zone between Iran and the Eurasian Economic Union. It is also important to maintain active relations with Russia and other countries of the Eurasian Union.”

In Manaserian`s opinion, effective economic management and utilizing the potential of the Armenian diaspora are important as well.

Manaserian believes that Armenia’s economic growth will heavily depend on geopolitical factors, and they could change in a way that leaves the economy without growth engines.”

He thinks that economic growth will be conditioned by:

• Strengthening domestic demand;
• Inflow of transfers;
• Stimulating tax and budgetary policies.

“Traditional growth in services, information technology, real estate, finance, and tourism will play a significant role. However, this might not be enough without reforms and improvements in the industrial and agricultural sectors.

Among external factors, developments in the Chinese economy and the war in Ukraine are significant. These and other external factors could also impact the exchange rate of the Armenian dram.”