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 2017 2.5%

EBRD forecast for Armenia's Real GDP Growth in 2018 3.0%

Armenia’s economy made a good start in 2016 but growth slowed in the second quarter; GDP growth decelerated from 4.5 per cent year-on-year in the first quarter to 1.5 per cent year-on-year in the second quarter of the year. In the first half of 2016, growth in exports and government consumption was offset, in part, by contraction in gross fixed capital formation and household consumption. Deflation in the first eight months of 2016 reflected weak domestic demand and low import prices. Armenia’s economy remained exposed to spill-overs from the recession in Russia. In the first half of 2016, net FDI inflow was low and remittances declined, albeit at a lower rate than in 2015. The current account deficit remained contained in the first half of 2016 after sizable adjustment in 2015 which was driven by a reduction in imports. In the first nine months of 2016, the dram was mostly stable vis-à-vis the US dollar. International reserves provided approximately five months of import coverage as of September 2016. Tax and customs revenues were affected by deflation and by decreased nominal value of import flows. The fiscal deficit is expected to widen in 2016 on the account of revenue shortfall, followed by fiscal consolidation in 2017. In response to slowing growth, negative inflation and a stabilizing exchange rate, the Central Bank of Armenia gradually lowered refinancing rate from 10.50 per cent in August 2015 to 6.75 per cent in September 2016. In the first seven months of 2016, commercial bank lending remained mostly flat in the context of weak domestic demand and continued consolidation in the banking sector. The conflict in the Nagorno-Karabakh region presents a risk to the growth outlook. Our growth forecast for Armenia is unchanged at 2.0 per cent in 2016 and 2.0 per cent in 2017.

Armenia in the EBRD’s 2016-17 Transition Report