Armenia Economy

Armenia Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax system

Basic data

Armenia’s GDP is roughly 1 billion USD. The performance of the economy has been volatile in recent years. After several years of strong GDP growth (+7.5% in 2017, +5.2% in 2018, +7.6% in 2019), radical changes for the worse took place in 2020. As a result of the coronavirus pandemic, but especially the autumn war over Nagorno-Karabakh, GDP fell by 7.6% in 2020. The year 2020 was particularly hard felt by construction, trade and tourism; on the other hand, the public sector, healthcare (where expenses increased due to the pandemic) and finance were less affected. The effects of the war were and are clearly more devastating than the effects of the pandemic. Armenia thus found itself in the worst recession since 2009, when real GDP fell by 14.1%. Economic recovery will be complicated and demanding, due, among other things, to persistent geopolitical and domestic political risks. In 2021, Armenia’s economy partially recovered, posting growth of 5.8%, higher than expected. Forecasts for 2022 initially predicted economic growth of around 5%, but revised estimates dropped to around 1.5% due to Russian aggression against Ukraine. Inflation also increased during 2020, reaching 3.7% in 2020 (compared to average annual inflation of 2.5% in 2018 and 1.4% in 2019). Inflation rose by more than 7% in 2021. Inflation is now moving above the upper inflation targeting band of the Central Bank of Armenia. The unemployment rate also remains extremely high, hovering around 15%. A large part of the population remains employed in the informal sector, the gray economy is quite extensive. Check ebizdir for economical facts of Armenia.

Armenia is a small open economy. The economy is structured as follows – agriculture (11%), industry and construction (27%), services (53%). Important sectors include mineral extraction, the textile industry, and jewelry. Tourism grew from services in the years before covid. Armenia is largely dependent on the export of raw materials, especially copper and precious metals.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 7.6 -7.8 5.5 4.9 4.6
GDP/population (USD/PPP) 14,247.00 13,321.70 14,500.00 15,610.00 16,740.0
Inflation (%) 1.4 1.2 7.2 5 4.2
Unemployment (%) 18.2 18.2 16 15.5 15
Export of goods (billion USD) 2.6 2.3 3.4 3.7 4.1
Import of goods (billion USD) 5.5 4.4 5.6 6.3 6.8
Trade Balance (Billion USD) -1.8 -1.4 -1.5 -1.7 -1.8
Industrial production (% change) 21.1 -12 3.5 5.5 3.4
Population (millions) 3 3 3 3 3
Competitiveness ON ON ON ON ON
OECD export risk 06.VII 06.VII 06.VII ON ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -4.2
Public debt (% of GDP) 60.1
Current account balance (billion USD) -0.2
Taxes 2022
F.O 21%
VAT 20%

The government was able to cover the budget deficit in 2020 thanks to loans and grants from the IMF, the World Bank and the EU. The national debt at the beginning of 2021 exceeded 8 billion USD. In February 2021, the government issued Eurobonds worth USD 750 million. At the end of 2021, the national debt exceeded USD 9 billion, which is more than 60% of GDP. Despite major shocks and changes, the 2022 budget basically copies the previous year’s budget with higher growth projections. It expects a recovery, growth of 7% and a GDP of around USD 14 billion. The planned deficit is USD 482 million. Revenues are expected to be almost 25% of GDP, of which about 95% will be provided through tax collection. The largest expenditures will be directed to social security (billion USD or 27% of budget expenditures), to the public sector (including healthcare, education and others), to defense (705 million USD).

The outlook for the next few years will be strongly influenced by the ongoing uncertainty arising from geopolitical and domestic political risks. Real GDP growth is expected to moderate in 2022, but remain positive, subject to stabilization of external conditions and recovery of sectors of the economy; however, depending on further developments in the region, there may be a further decline.

Armenia has a negative trade balance. The mentioned foreign loans partially strengthened the foreign exchange reserves. In 2022, 10% of the budget should go to cover the national debt. In 2022, the state budget deficit should also be slightly reduced to 3.2% of GDP. Public debt exceeds 60% of GDP and is expected to rise even further in the coming years. A dollarized economy and undifferentiated exports mean significant challenges. Another weakness is the weak inflow of foreign direct investment (FDI). The risks are partly mitigated by a relatively healthy banking sector and some fiscal reserves.

Banking system

Armenia has a relatively strong and stable financial system. It is dominated by commercial banks (83.5% of assets), of which 17 operate in the Armenian market. The banks are in private hands, without state participation. Foreign companies have shares in all Armenian banks (65% in total). Seven banks are fully foreign-owned, only another seven banks have more than half shares of Armenian owners.

Banks provide a number of standard services, including bank transfers, loans, deposit accounts, etc. Both Armenian citizens and foreigners can have foreign currency bank accounts. There are no restrictions on the exchange or transfer of money or the return of capital and profit.

Among the most important and strongest banks in Armenia are “Ameriabank” CJSC, “ARMBUSINESSBANK” CJSC, “Ardshinbank” CJSC, “ACBA-CREDIT-AGRICOL BANK” CJSC, “InecoBank” CJSC and “Converse Bank” CJSC. The smallest of the seventeen banks is the Iranian “Mellat Bank” CJCS, which in the past has been the target of sanctions (and subsequently involved in related lawsuits) in some Western countries due to its ownership. All banks have headquarters in Yerevan.

The Central Bank of Armenia strives to adhere to strict regulatory standards. Even the pandemic did not significantly shake the local banking system. The central bank raised the interest rate for the last time in March 2022 to 9.25%, the aim is to slow down inflation.

Tax system

The tax system in Armenia is generally transparent and business-friendly. There are six and seven main taxes respectively. These are value added tax (VAT is 20%), profit tax (20%) or turnover tax (in the amount of 1.5-5%, the percentage is determined by legislation according to the field of activity), income tax (21%; social security contributions in the amount of 5 to 10% depending on the amount of salary are also paid), real estate tax, land tax, consumption taxes and so-called simplified taxes. Various special payments of simplified taxes may also be established according to special legal regulations. All laws and other useful information are available in English and Russian on the website of the State Tax Service of Armenia (

The system is structured in such a way that most taxes are state and paid directly to the state budget. Value added tax is the largest revenue item, contributing more than a third of budget revenue. In addition to subsidies from the state budget, local budgets only receive income from property tax in municipalities and several fees and local payments. Poor tax administration is one of the biggest problems in the tax system, but it has changed for the better in recent years (in 2021, Armenia reported a 14% increase in tax revenue, exceeding the 2021 state budget target by $304 million).

Corporate income tax is 18%. Small and micro companies can take advantage of special tax regimes (reduction of taxes and simplification of paperwork). A profit tax of 20% applies to businesses with a turnover of more than $240,000 per year. Sales tax is between 1.5% and 5% (applies only to small businesses with a turnover of up to about $240,000 per year). Some micro-businesses (turnover up to about USD 50,000 per year) may be exempt from both income tax and VAT. Companies may also be required to pay consumption, environmental, road or property taxes. There is a special regime to support the IT sector.

Armenia Economy