Armenia’s economy has undergone a profound transformation since independence. Sustained growth, ambitious reforms, as well as inflows of capital and remittances have created a market-oriented environment. However, the global financial crisis impacted significantly the market of the country. 

Double digit growth rates of pre-crisis period were replaced by a 4.0% rate after the crisis. Following a moderate 3.2% growth in 2013, it slowed down to 2.1% in 2015. Positive results from agriculture, mining, and tourism were offset by sluggish manufacturing and other services. In the medium term, it is expected that economic growth will slowly recover but still remain below the newly estimated potential of 3.5% per annum.

The key challenge for the government is to sustain growth in unfavorable external environment with limited space for a fiscal stimulus. The country is confronted with the need to maintain a sustainable fiscal framework in the face of increased debt service obligations, falling capital investment, and slowing economic growth. 

With an estimated per-capita GDP of US$ 3,830 (GNI, 2014), Armenia is a lower middle-income country. Remittances from migrant workers, that play an important role in Armenia’s economy, decelerated in the second half of 2014 as macroeconomic performance in Russia deteriorated, severely constraining demand for imported consumer goods. With exports and remittances dependent on international prices for commodities, the Armenian economy becomes more exposed to the balance of payments shocks, as these prices are on declining trend now.

The effect of the financial crisis on rural and urban poverty has been dramatic—the poverty rate increased from 27.6% in 2008 to 32% in 2013. The geography of poverty in Armenia shows substantial gaps between the capital city Yerevan (25.6%), rural areas (31.7%), and other urban areas (39.4 percent). The role of targeted social expenditures and pension increase is to result in substantial poverty reduction gains amidst a languished economic growth of the post-crisis period.

Last Updated: Nov 10, 2015

The World Bank Group’s Country Partnership Strategy (CPS) for 2014-2017 is focusing on the most binding constraints to private sector led sustainable growth through strengthening competitiveness and job creation. Simultaneously, the strategy aims at consolidating the impact of social services.

In addition to investment projects and analytical work, the Bank continues its support through a number of policy reforms supported by the series of three  Development Policy Operations (DPO) and the respective Financial Advisory Technical Assistance, specifically in the areas of consolidated supervision, secured transaction reform, disclosure of information on ultimate beneficial owners, and insolvency/foreclosure. In addition, the Bank provides technical assistance to the Ministry of Finance to enhance its capacity in financial sector regulation and pension reform oversight.

As of October 2015, the World Bank’s portfolio in Armenia performs satisfactorily and consists of 18 operations with a total commitment of US$582.3 million. In private sector, the bank is supporting the strengthening of Government’s capacity to provide export promotion, investment attraction, and quality services to firms. In energy sector, the aim is to improve energy efficiency of social and other public facilities along with the reliability of energy supply. Through the support to the agriculture the objective is to address farmers’ competitiveness through addressing productivity and supply constraints. The interventions in ICT have led to the increase in the share of the population with access to a computer, a share that more than tripled between 2009 and 2013. The education sector work is targeting quality and relevance issues in secondary general and higher education, making the system inclusive from very early on. The projects in health sector will providing more accessible, high-quality, and sustainable health care services to the population.

Apart from lending instruments, the Bank is engaging in the country though grant projects, trying to boost the capacity in service delivery in a number of key areas. An active program of 40 trust fund operations totaling US$19.7 million is supporting institutional capacity building, project preparation, and activities in key reform areas as well as financing stand-alone grant projects.

Last Updated: Nov 10, 2015

The World Bank’s impact in Armenia has been felt across many sectors including roads, energy, agriculture, education, health, irrigation, rural development, public administration, and judiciary.

Recent development results in Armenia include:

Improving Rural “Lifeline” Roads:
The most isolated communities in Armenia are benefitting from improved roads that can bring in tourists and chances for economic revival. The Lifeline Roads Improvement Project has reconnected Armenia’s isolated rural communities to their urban centers. Since 2009, 290 km of roads linking villages to main highways have been rehabilitated while creating over 27,000 person-months of employment in affected rural areas. By the end of 2013, 140 additional km will be rehabilitated.

Reforming the Energy Sector:
Second generation energy reforms in Armenia focused on the use of safe, clean and affordable heating and renewable energy generation. IDA-supported reforms drove up the share of urban households using safe and clean gas-based heating from 13% in 2005 to 71% in 2010. Gas-related explosions, poisonings and fires reduced four-fold. Privately owned renewable energy generation grew from 137 GWh to 417 GWh.

Improving Access to Water:
The quality, reliability, and efficiency of water supply services have improved dramatically for Yerevan, the capital and largest city of Armenia. The International Development Association (IDA) has supported the government of Armenia in providing a safe and stable water supply and reducing environmental pollution through two water and wastewater management projects. Over 332,000 households in Yerevan have benefitted from improvements in the duration of water supply and water quality.

In addition, the average number of daily hours of drinking water service outside the capital city increased from an average of six hours per day in 2004 to 17 hours per day in 2011.

Modernizing Healthcare:
Through two phases of the Heath System Modernization project about 2.5 million Armenians have better access to modernized facilities and quality health care provided by retrained physicians and nurses.  In the regions, a small number of specially trained physicians in centralized, renovated regional medical centers now provide a wide range of health care services with state-of-the-art equipment.

Improving Agriculture through Irrigation:
Irrigation is slowly changing the landscape of Armenian agriculture and improving the lives of farmers. Instead of growing wheat or barley, thousands of the country's small farmers have been planting crops that need more water but ultimately yield more cash. The transformation comes thanks to investments supported by the World Bank over many years in the country's irrigation and water rights systems. Additionally, 71 irrigation dams were brought up to international safety standards, reducing the risk of dam failure and flooding for about 570,000 people living downstream from the dams.


Armenia: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments