Economy of Armenia

The economy of Armenia grew by 12.6% in 2022, according to the country's Statistical Committee and the International Monetary Fund. Total output amounted to 8.5 trillion Armenian drams, or $19.5 billion. The economy of Armenia is based largely on industry, including chemicals, electronic products, machinery, processed food, synthetic rubber, and textiles. Armenian mines produce copper, zinc, gold, and lead. The majority of energy is produced with imported fuel from Russia, including gas and nuclear fuel for Armenia's Metsamor nuclear power plant. The main domestic energy source is hydroelectric. Small amounts of coal, gas, and petroleum have not yet been developed. The severe trade imbalance has been offset somewhat by international aid, remittances from Armenians abroad, and foreign direct investment. Armenia is a member of the Eurasian Economic Union, and ties with Russia remain close, especially in the energy sector.

Top Sectors in Armenia

Agriculture in Armenia

The agricultural sector accounted for about 20 percent of Armenia's GDP. This share was impacted by bad weather, a lack of a government stimulus package, and decreased agricultural subsidies mandated by the Armenian government as per WTO requirements. Armenia has a higher percentage of agriculture as a component of GDP compared to neighboring countries like Georgia, Azerbaijan, Turkey, and Iran.

Mining in Armenia

Armenia's mining industry output grew by 14.2% to 172 billion AMD, which represents about 3.1% of Armenia's GDP. Mineral product exports (excluding precious metals and stones) grew by 46.9% to US$692 million, comprising 30.1% of all exports.

Construction in Armenia

Construction output increased by 2.2% to 416 billion AMD. However, during the January to September 2010 period, the sector experienced a 5.2% year-on-year decrease, indicating challenges in sustaining a sector primarily focused on elite markets with few products catering to median or low budgets. Despite government efforts to support ongoing construction projects through stimulus packages, the decrease persisted.

Energy and Electricity in Armenia

Maldives were renowned for cowries, coir rope, dried tuna fish (Maldive fish), ambergris (maavaharu) and coco de mer (tavakkaashi). Local and foreign trading ships used to load these products in the Maldives and bring them abroad.Nowadays, the mixed economy of Maldives is based on the principal activities of tourism, fishing and shipping. This results from the Maldives' strategic geographic positioning near crucial sea routes essential for China's energy provisions. Consequently, China has persistently utilized its economic resources to enhance its sway over the Maldivian government.

Industrial in Armenia

Industrial output increased by 12.6% annually, reaching 1661 billion AMD. The growth was driven by the mining sector, benefiting from higher global demand and commodity prices. Despite this growth, Armenia's industrial sector had been relatively stagnant in previous years, with industrial output increasing by only 1.7% per year in some periods. In 2005, industrial output (including electricity) accounted for about 30% of Armenia's GDP.

Services in Armenia

Armenia's economy has shown rapid growth, with GDP averaging a 6.8% annual rate. After political changes in 2018, prudent macroeconomic policies contributed to macroeconomic stability and an improved business environment. In 2020, the service sector experienced a 14.7% reduction in volumes, totaling 1.7 trillion drams ($3.5 billion). This decline affected all service segments except finance, information, and communication.

Retail Trade in Armenia

Armenia's retail sector has faced challenges due to existing monopolies, resulting in near-zero growth during crises. However, improvements in living standards and income have positively impacted the retail sector. Most retail development remains concentrated in Yerevan, with new malls like Dalma Garden Mall, Yerevan Mall, Rio Mall, and Rossia Mall enhancing retail quality. Expansion into other cities, such as Gyumri with the Shirak Mall, signifies broader retail growth. Additionally, advancements in the banking industry have facilitated easier access to financial assistance, contributing to retail sector development.

Armenia - Key Economic Indicators

Exports and Imports

Armenia's exports continued their upward trend in 2023, with estimates reaching around $6.2 billion USD. Copper, gold, diamonds, and tobacco remain key exports, with Russia still the top destination. Imports also rose to an estimated $9.1 billion USD in 2023, resulting in a persistent trade deficit.

Balance of Trade

Armenia's trade deficit remains a challenge, though efforts are underway to boost exports. The government is looking for ways to close the gap, potentially through increased trade with non-EAEU partners.

Infrastructure Development

Road construction is a major focus in Armenia's infrastructure development plans. While the most recent data available is from 2020, the total road network is estimated to exceed 8,500 kilometers by now. Other projects include railway modernization and improving border infrastructure.

Fiscal Policy

Balancing government spending with tax reform is an ongoing priority for Armenia. The government aims to strike a balance between funding social programs and critical infrastructure development.

Monetary Policy

The Central Bank of Armenia continues to play a crucial role in managing inflation and maintaining financial stability. They use interest rates and foreign exchange reserves to stabilize the Armenian Dram.

Trade Agreements

Armenia's membership in the Eurasian Economic Union (EAEU) offers preferential trade access with Russia and other members. The country also continues to pursue additional free trade agreements to diversify its trade partnerships.

Environmental Regulations

Armenia is strengthening its environmental regulations to address air and water pollution concerns. They are also investing in renewable energy sources, like solar and wind power, to promote a more sustainable future.

Tax System in Armenia

capital gains tax. However, income from selling property continues to be subject to the unified income tax rate. The rate and exemptions may vary depending on the property type, how long you held it, and whether you sold it to a resident or individual.
Corporate tax rate: The attractive corporate income tax (CIT) rate of 18% remains unchanged. This flat rate applies to both Armenian companies and foreign businesses with a presence in the country.
Sales tax: Armenia still uses a Value Added Tax (VAT) system. The standard VAT rate remains at 20%, with some exemptions and a zero-rate for specific goods and services.
Property tax: Property tax on real estate is still levied, and rates can vary depending on the property type and location.
Payroll tax: A significant change here. As of July 1, 2023, the income tax rate for employees of microenterprises increased. Previously, they had a special tax of 5,000 AMD per month. Now, their earnings are taxed at the general income tax rate of 22%. This applies to most income types, including wages and salaries, with a portion funding social security.
Tax deductions and credits: Armenia continues to offer limited tax deductions and credits compared to some developed nations. There are still exemptions for specific income sources like interest on government bonds and some social security benefits.
Tax compliance: The Armenian government's efforts to improve tax collection efficiency are ongoing. While some progress has been made, challenges persist, particularly regarding the informal sector.
Tax burden: Armenia's tax burden is still considered moderate compared to other Eurasian countries. The flat tax rates and focus on reducing exemptions continue to aim for a simpler system that could encourage investment.

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