Armenia Economics - Shifting the Focus to Reforms

With the political tension in Armenia having abated, the government can focus more on reforms. An improved business climate should attract new investors, provide a boost to the SME segment and make the economy more innovative, while at the same time shifting the focus away from the extraction sector (which is dominated by the metals and mining industry). The economy has been supported by increased household consumption, but this dynamic is not sustainable in the longer run without new investment and job creation. The transition to a new growth model could take some time, and during this period economic growth could decelerate (we expect 4.8% GDP growth this year and 4.5% next year). Slower export growth and stronger domestic demand have also resulted in a wider current account deficit (9.1% of GDP last year; this year we expect 6.7%). However, the new IMF agreement and possible further monetary and fiscal easing could smooth the transition.