“The impact of the war in Ukraine and sanctions on Russia is likely to be significant given Armenia’s strong economic links with Russia,” the bank said in its latest Europe and Central Asia Economic Update.
“The growth forecast has been downgraded for 2022 from 5.3 percent pre-war to 1.2 percent, with lower remittances and real wages impacting consumption; heightened uncertainty impacting investment; and exports contracting due to the projected contraction in Russia and slowing global and regional growth,” it added.
The Central Bank of Armenia cut its economic growth forecast for 2022 from 5.3 percent to 1.6 percent about a month ago. It too predicted sizable drops in Armenian exports to Russia and multimillion-dollar remittances from Armenians working there.
Russia is Armenia’s number one trading partner and export market, with bilateral trade totaling $2.6 billion last year, a fact emphasized by the World Bank.
“Russia accounted for 28 percent of Armenia’s exports and 30 percent of its imports on average from 2018-2021 and is the source of all of Armenia’s wheat and gas imports,” reads the bank’s quarterly report. “In 2021, remittances from Russia amounted to 5 percent of GDP, 41 percent of net [foreign direct investment] stock was associated with Russian entities, and Russian tourists accounted for 40 percent of all tourist arrivals.”
“In addition, Armenia will also be impacted by elevated global food and fuel prices, with fuel imports accounting for 9 percent of imports in 2021,” it adds.
Food prices in the country rose by an average of 12.1 percent in the first quarter of this year, government data shows. They already went up by over 11 percent last year, reflecting a global trend.