The economy shrunk by 7.6 percent last year due to negative effects of the coronavirus pandemic compounded by Armenia’s war with Azerbaijan. It returned to growth this spring and is now projected to expand by at least 6 percent in 2021.
Both the World Bank and the International Monetary Fund anticipate slower growth in 2022. The bank forecast a 4.8 percent growth rate for the South Caucasus nation in a report released earlier this month.
A senior IMF official similarly predicted last month that Armenian growth will slow down to 4.5 percent in 2022. “Downside risks remain elevated, including from geopolitical tensions, a slowdown in external demand, and heightened global financial market volatility,” he said.
The Armenian government’s five-year policy program approved by the parliament in August says that GDP should increase by 7 percent annually. Pashinian stood by this ambitious target when he presented the government’s draft 2022 budget to lawmakers.
“Although most of the current year was marked by an unstable political and security environment, our economy is now exceeding all growth forecasts made for 2021,” he said. “On the other hand, based on this year’s results, the government hopes for more.”
The draft budget commits Armenian tax authorities to increasing state revenue by as much as 25 percent next year. This would not only finance a 15 percent rise in public spending but also cut the country’s budget deficit that widened significantly during the recession.
The bill does not envisage major pay rises for public sector employees and would keep the national minimum wage unchanged at 68,000 drams ($143) per month. The government is only planning to raise the minimum pension by 2,100 drams.
Consumer price inflation in Armenia has risen significantly this year, reaching an annual rate of about 9 percent in August on the back of increased food prices.