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Overview

  • Country Context

    ARMENIA

    2020

    Population, million

    2.9

    GDP, current US$ billion

    13.7

    GDP per capita, current US$

    4.655

    Poverty Rate (US$5.5/day 2011 PPP terms) (2018)

    42.5

    Life Expectancy at birth, years (2018)

    74.9

    After the spread of COVID-19 in March, tight restrictions were introduced, and a full lockdown was imposed in April. However, restrictions were eased too soon in May, which led to a subsequent surge in infections. Since July, infection and fatality rates have declined, as implementation of control measures was tightened; however, both infection and fatality rates have remained among the highest in the Europe and Central Asia region.

    Following robust growth in the past three years, which continued also in the first two months of 2020 (of more than 9 percent year-on-year [y-o-y]), growth has turned negative since March (due to the restrictions imposed as the pandemic spread) and registered a 5.7 percent y-o-y contraction for the first half of the year. Inflation remains subdued, averaging 0.8 percent for the year up to August 2020, reflecting deflation in food and world oil prices and lower aggregate demand. 

    The Government has launched 25 economic and social measures to mitigate the pandemic at an estimated cost of roughly 2.3 percent of GDP. The increased current spending, with lower revenue collection, will increase the state budget deficit from an originally planned 2.3 percent of GDP to 5.4 percent, pushing up public debt to above 60 percent of GDP.

    Last Updated: Oct 12, 2020

  • Strategy

    Number of Active Projects

    13 (2 IDA/IBRD blend projects are dual quantified)

    Lending

    $582.12 Million

    IBRD

    $505.16 Million

    IDA

    4 Credits

    For over 28 years, the World Bank Group (WBG) has been a key partner for Armenia, with a sustained history of successful investments in various sectors of the country’s economy and an equally deep history of policy reform dialogue.

    The new Country Partnership Framework (CPF) for FY19–23 will support the rebalancing of Armenia’s economy toward a new growth model focused on boosting exports, enhancing human capital, and sustainably managing natural resources and the environment.

    The CPF is well aligned with the four thematic pillars outlined in the WBG’s Approach Paper that are defined as saving lives, protecting the poor and vulnerable, ensuring sustainable business growth, and strengthening policies, institutions, and investments.

    The World Bank and International Finance Corporation (IFC) have a rich and diversified portfolio in Armenia, with finance mobilized from a range of concessional sources using various instruments.

    The WBG is increasingly focused on sharing country knowledge and operational experience to leverage other development partners’ resources for effective public investment.

    KEY ENGAGEMENT

    The World Bank has supported health reforms in Armenia since the late 1990s, investing in high-impact interventions to improve the quality of care, optimize the health facility network, and introduce financing mechanisms to boost service access and efficiency.

    Through the Health Financing and Primary Health Care Development Project (1997–2004) and the Health System Modernization Project (2004–16), the World Bank has supported the establishment of the State Health Agency to facilitate the strategic purchasing of health services, the introduction of a family medicine specialty at the primary health care level, and reductions in the oversized Marz bed capacity by 40 percent.

    The ongoing Disease Prevention and Control Project (2013–22) has financed performance-based financing to increase the detection of chronic diseases, including 1.4 million screens for hypertension. The project has supported the construction and renovation of five regional hospitals, as well as procurement in response to the COVID-19 pandemic, including 70 ventilators, 80 patient monitors, and other equipment for case management and personal protection.

    To inform new investments in this regard, the World Bank team is providing technical assistance toward the goal of universal health coverage. This support aims to inform an increase in public financing for health care, provide recommendations on aligning allocative decisions with better service delivery, identify interventions to improve the quality of service delivery, and help convene policy and technical knowledge exchanges on global experience in investing in universal health coverage.

    Last Updated: Oct 12, 2020

  • Recent Economic Developments

    Armenia’s economic contraction of 5.7 percent in the first half of 2020 was driven by a 9 and 31 percent sharp contraction of private consumption and investment, respectively, which was only partially offset by higher government spending and import compression.

    Among the sectors, construction and services were most affected, with the financial and information and communications technology sectors remaining more resilient due to their greater reliance on digital technologies. Agricultural output grew by 1.8 percent y-o-y in the first half of 2020, and a low base in 2019 pushed growth in mining to 21.7 percent y-o-y.

    In the first seven months of 2020, current budget spending increased by 19 percent y-o-y, while capital spending was up by 62 percent from a low base in 2019. Revenues fell by 6 percent y-o-y, resulting in a deficit of around 1.7 percent of projected annual GDP in the first half of the year.

    The smaller trade deficit, due to a larger contraction in imports than exports, partly offset the decline in services (particularly tourism) and income accounts (remittances). Despite slowing inflows of foreign direct investment, support from international financial institutions financed the deficit and kept reserves at around US$2.7 billion at the end of August.

    The Armenian dram, after depreciating by 5.5 percent in March following the initial COVID-19-related shock, recovered in April and has remained largely stable since. 

    The financial sector entered the pandemic with strong capital and liquidity levels. As a result, banks have been able to offer moratoria on debt servicing to borrowers while continuing to extend credit. Credits and deposits expanded by 17 and 11 percent y-o-y, respectively, as of end-July. 

    Economic Outlook 

    The economy is projected to contract by 6.3 percent in 2020 before rebounding by 4.6 percent in 2021. Output is projected to recover to pre-COVID levels only in 2022. However, the risks are firmly on the downside, particularly from a potential pickup in COVID-19 infections in the upcoming winter and from the lack of or delay in the availability of vaccines in 2021. In this downside growth scenario, the economy will contract further in 2020 with a slower rebound in 2021, which will postpone the recovery of output to pre-COVID levels to 2023.

    Inflation will remain muted and converge on the Central Bank of Armenia’s 4 percent target gradually over the medium term.

    The rise in the budget deficit to 5.4 percent of GDP, coupled with the decline in GDP, is expected to push public debt up by 10 percentage points to 63 percent of GDP in 2020. The Government’s 2021–2023 Medium-Term Expenditure Framework envisages a strong fiscal consolidation that brings the deficit below 2 percent of GDP by 2023. This corresponds to a gradual decline in the debt-to-GDP ratio, consistent with the fiscal rule.

    The economic contraction in 2020 is expected to cause a sharp increase in unemployment. The upper-middle-income poverty rate could increase by 4.8 percentage points. 

    Last Updated: Oct 12, 2020


LENDING

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

*Amounts include IBRD and IDA commitments



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Additional Resources

Country Office Contacts

Yerevan, Armenia
9 Grigor Lousavorich St., Yerevan 0015, Armenia
+374-10-52-09-92
yerevan@worldbank.org