Armenia overview

Urban scene in Armenia

In Armenia we focus on:

Developing the financial sector and improving access to finance. The EBRD will focus on providing its traditional SME and micro-finance lines targeting areas outside Yerevan, the capital, and facilitating access to credit for SMEs in the rural areas. In rural areas, we will launch agricultural credit lines in local currency and associated Technical Cooperation (TC), in particular as the sector becomes more commercialised. The EBRD, in cooperation with the IMF and World Bank, will engage in policy dialogue and provide TC to strengthen the Central Bank’s capacity to reduce inflation and dollarisation and develop local money and capital markets.

Improving municipal and urban transport infrastructure. The EBRD will support enhanced private sector participation in the water and waste water sectors to support the introduction of cost-reflective tariff structures, improve service availability and reduce losses. We will support through our investments urban and municipal transport reforms including the introduction of integrated transport management and ticketing systems, better parking management and regulation of feeder bus and minibus services. Intensive policy dialogue will be required to support reforms at the central and local levels.To address affordability and debt capacity constraints, a high level of grant co-financing will be required along with gradual tariff increases toward cost recovery.

Developing agribusiness and high value-added, export-oriented industrial companies. The EBRD will help to address challenges in the industrial sectors through support for improvements to the business environment, strengthening corporate governance and increasing access to finance for local micro, small and medium sized enterprises (MSMEs). We will identify investments in industries with export potential, including in areas highlighted by the authorities’ recent programme of export promotion. The EBRD will aim to support the agricultural sector by targeting investments along the whole value chain. Where possible, we will aim to utilise local currency financing. The EBRD will also enhance activities to support MSMEs in key sectors through provision of advisory services.

Improving the regulatory and institutional framework for sustainable energy and increasing value-added in the mining sector. The EBRD will support investments in financially viable renewable energy projects and, through partner banks, continue to finance energy efficiency credit lines for industrial and residential users. We will support power generation, particularly new entrants and non-state participants, and will consider participating in regional electricity infrastructure projects that strengthen competition in the regional electricity market. The EBRD will support bankable mining operations with reputable investors who demonstrate high standards of environmental and social protection.

As well as being a country where the EBRD works, Armenia is also an EBRD donor. In 2015 Armenia signed a €1 million contribution agreement to the Eastern Europe Energy Efficiency and Environment Partnership (E5P) Fund. The first EBRD project with co-financing with E5P for street lighting in Yerevan was signed in 2015.

The EBRD’s latest Armenia strategy was adopted on 25 November 2015

EBRD forecast for Armenia’s Real GDP Growth in 2016 2.0%

EBRD forecast for Armenia's Real GDP Growth in 2017 2.0%

Armenia grew by close to 3 per cent in 2015 despite economic spill-overs from Russia, regional currency adjustments and lower remittances. Growth in 2015 was supported by a positive contribution from agriculture and mining and was driven by government consumption and an improvement in net exports. However, gross capital formation and household consumption decreased. Inflation has been contained by the stability of the dram, a tight monetary policy and low commodity import prices. The dram-US$ exchange rate has been predominantly stable on the back of central bank interventions early in 2015 and, more recently, the large adjustment of the current account. Gross international reserves were at close to four months of imports in the first quarter of 2016, helped by the issuance of a sovereign Eurobond in March 2015. Public finances remained generally sound, although fiscal space is limited, as general government gross debt is expected to increase to close to 50 per cent of GDP in 2016. Growth and currency stability in the first quarter of 2016 were helped by positive dynamics in industry, agriculture and services, and an increase in exports and fall in imports. The banking sector loan book remained flat in line with a consolidation in the financial sector. The conflict in the Nagorno-Karabakh region represents a risk to the growth outlook. We have left our 2016 Armenia GDP growth forecast unchanged at 2 per cent and we are forecasting growth of 2 per cent for 2017.

Armenia in the EBRD’s 2015-16 Transition Report