The 5.6% economic growth forecast by the Armenian government for 2025 is more optimistic than realistic, according to economist Agasi Tavadyan.
Commenting on the draft law "On the State Budget of the Republic of Armenia for 2025," which was approved by the government on September 26, Tavadyan pointed out that the factors driving Armenia’s economic growth in recent years are gradually weakening, reports Armenpress.
The expert noted that the external factors that fueled economic growth in 2022 and 2023 have largely been exhausted. He believes the government has set an optimistic target, aiming to reach high growth rates, but there is a likelihood that actual economic growth will fall significantly short of this target.
Tavadyan explained that the 12.6% economic growth in 2022 was primarily driven by capital inflows from Russia due to sanctions, the temporary relocation of Russian IT specialists to Armenia, and a threefold increase in the country’s export performance. He also highlighted the role of the banking system in the 2022 growth, which began to decline at the start of 2023.
The economist emphasized that in 2023, there was a noticeable reduction in capital inflows and an increase in capital outflows. From November 2023 to early 2024, economic growth was primarily supported by the re-export of gold (from Russia through Armenia to the UAE and Hong Kong), which pushed Armenia’s export figures to 71%, despite an overall decline in exports and the economy.
Tavadyan suggests that, given all the current circumstances and realities, economic growth in Armenia is likely to revert to the long-term average of 4.5%, making the projected 2025 growth more modest than the government anticipates.
Earlier, BMG reported that the Armenian government approved the 2025 state budget, which outlines a significant increase in both revenues and expenditures. The budget draft projects GDP growth of 5.6% for 2025, with an average inflation rate of 3.5%.
Meanwhile, the Asian Development Bank (ADB) recently revised its economic growth forecast for Armenia, raising its projections for 2024 and 2025 to 6%. This is an improvement over the bank’s May forecast, which anticipated 5.7% growth for 2024.
