Armenia`s GDP growth slowed to 8.7% in 2023

ArmInfo. Armenia's GDP growth slowed down to 8.7% in 2023 (from 12.6% in 2022), amounting to 9.503  trillion drams ($24.2 billion). The GDP deflator index also decreased - to 102.8% from 108% in 2022, according to the data of the RA Statistical Committee published on February 20.

Notably, as a year ago, the closest to real GDP growth was the CBA's  forecast of 8.3% growth in 2023, while the IMF and World Bank  expected a more moderate growth of 7% and 7.1% respectively. 

The quarterly dynamics of GDP in 2023, as in previous years, was  negative in Q1 alone- 36.3%, after which there was an increase of  16.5% in Q2, accelerating to 27% in Q3, but already slowing to 14.4%  in Q4. For comparison, let's note that the quarterly GDP dynamics in  2022 was as follows: a decline of 36% in Q1, was changed by 19.6%  growth in Q2, which accelerated to 29.4% in Q3, but then slowed down  to 13.8% in Q4.

GDP per capita increased quarterly during 2023: from 608.356 thousand  drams ($1550) in Q1 to 726.474 thousand drams ($1877) in Q2 and  reaching 872.832 thousand drams ($2258) in Q3, and already exceeding  1 million drams ($2501) Q4. Such an increase in GDP per capita is  recorded amid the y-o-y increase of the population of Armenia by 53.4  thousand people- up to 2.991 million people by January 1, 2024, while  in 2022, per capita GDP showed growth with a more modest population  growth of 15.4 thousand people. But it is important to note that such  population growth is due to the impressive flow of immigrants rather  than natural growth, many of whom chose to obtain a residence permit  and temporarily settle in Armenia. The absolute value of natural  population growth in Armenia in 2023 was 11,960 thousand people,  exceeding the figure of a year ago by 23.5%.

The drivers of GDP growth in 2023 were largely the trade sector -  25.7%, the construction sector - 14.8%, the service sector - 10.3%,  and to a slightly lesser extent the industrial sector - 4.1%, and the  agricultural sector was in a decline of 0.3%. A year earlier, in  2022, GDP growth came from all areas: the service sector - by 28.2%,  the trade sector - by 17%, the energy complex - by 16.1%, the  construction sector - by 12.5%, the industrial sector - by 7 .9% and  the agricultural sector - by 0.4%.

Against this background, the growth rate of Armenia's foreign trade  turnover also stalled from 68.6% to 46%, which was provoked by a  slowdown in the growth of both exports from 77.7% to 55.3% and  imports from 63.5% to 40.2%. 

According to the Central Bank's forecast, Armenia's GDP growth will  slow down to 6.1% in 2024. The World Bank forecasts a more noticeable  slowdown in Armenia's GDP growth to 4.7% in 2024. For the South  Caucasus, the World Bank forecasts stable growth of 3.3% for  2024-2025, while expecting that the influx of remittances from Russia  will continue to decline, and re-exports and tourism will continue to  support economic activity. However, according to the World Bank,  long-term growth will continue to be hampered by dependence on raw  materials, weak transport communications and logistics, as well as  the likelihood of escalation of relations between Armenia and  Azerbaijan.