ArmInfo. The Asian Development Bank (ADB) forecasts GDP growth for Armenia of 5.5% in 2026 (compared to 7.2% in 2025), accelerating to 5.7% in 2027. According to the ADB forecast, inflation in Armenia will accelerate to 3.8% in 2026 (from 3.3% in 2025) and then retreat to 3.2% in 2027, as noted in the Asian Development Bank's April report "Asian Development. Outlook. The Middle East Conflict Challenges Resilience in Asia and the Pacific".
For Developing Asia and the Pacific (DAP), the ADB forecasts economic growth of 5.1% in 2026 (versus 5.4% in 2025), maintaining this growth rate in 2027. Excluding China, the ADB forecasts growth of 5.5% in 2026 (compared to 5.9% in 2025) and 5.8% in 2027. For the Caucasus and Central and West Asia region (Armenia, Georgia, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, and Turkey), the ADB forecasts economic growth of 4.2% in 2026 (compared to 4.6% in 2025), accelerating to 4.4% in 2027. In the countries neighboring Armenia, the Asian Development Bank predicts for 2026-2027: in Georgia, GDP growth of 5.5-5.2% (compared to 7.5% in 2025) and inflation of 3.8-3.3% (compared to 3.9% in 2025); in Azerbaijan, GDP growth of 2-1.8% (compared to 1.4% in 2025) and inflation of 5.7- 4.9% (compared to 5.6% in 2025); in Turkey, GDP growth of 3.6-4% (compared to 3.6% in 2025) and inflation of 27.7-21.5% (compared to 35.2% in 2025).
The ADB report on Armenia notes: "Economic growth accelerated in 2025, supported by a recovery in industry, construction, and agriculture, while consumption and investment supported the economy. Strong domestic demand led to higher inflation. However, growth is projected to moderate in 2026 and 2027: a slight further decline in services will offset growth in construction and an acceleration in industry. Inflation is expected to rise despite the economic slowdown. However, a protracted conflict in the Middle East could significantly slow growth and sharply increase inflationary pressures. Capital market reforms promoting economic diversification are needed for further development."
Armenia's economic growth will be driven largely by domestic demand
ADB forecasts that Armenia's economic growth will be driven specifically by increased public investment and targeted social programs. However, the forecast faces downside risks due to the protracted conflict in the Middle East: supply disruptions through the Strait of Hormuz, rising global energy prices, and increased volatility in financial markets could exacerbate inflationary pressures, increase logistics costs, and dampen growth momentum. Upside risks (growth prospects) are associated with progress in the peace agreement with Azerbaijan, along with the normalization of relations with Turkey and the possible opening of the land border. If the process is stable, this could support economic growth through increased trade and transport connectivity.
ADB expects supply growth to be seen across all sectors, with the services sector being the main driver. Services sector growth is projected to accelerate to 7% in 2026 and 2027, driven by continued strong performance in finance, information technology and communications, real estate, and retail. Construction is expected to grow further, to 17.3% in 2026 and 17.9% in 2027, reflecting increased spending on infrastructure, refugee housing programs, and major transportation projects. ADB forecasts industry growth (excluding construction) to increase to 4.3% in 2026 and 4.4% in 2027, driven by increased production of food, textiles, and non-metallic products, as well as government efforts to stimulate exports and investment. Under normal weather conditions, agriculture is expected to grow by 4.1% in 2026 and 2027. Growth will be supported by targeted government programs to develop modern livestock farms, intensive horticulture, and expand crop insurance.
Consumption and investment will remain the main drivers of demand growth. Private consumption growth is projected to slow to 7.9% in 2026 and 7.6% in 2027, as the decline in remittances will be partially offset by continued lending expansion and the planned pension increase (effective April 2026). Government consumption growth will accelerate to 5.7% in 2026 and 6.4% in 2027, supported by increased allocations to social programs and higher healthcare spending due to the introduction of universal health insurance. Investment growth will remain strong-at 15.5% in 2026 and 15.7% in 2027-reflecting increased government spending on infrastructure and social projects, as well as private investment in housing construction. Inflation is expected to accelerate in 2026, despite slowing economic growth. This reflects the impact of higher global energy prices and transportation costs related to the conflict in the Middle East. As price pressures gradually ease, inflation will begin to decline in 2027. Monetary policy will remain cautious while continuing to support economic growth. By the end of 2026, the ADB expects monthly inflation (year-on-year) to approach the upper limit of the target range (3%, +/- 1 percentage point).
In 2026, fiscal policy will become more expansionary. The 2026 budget envisages a deficit-to-GDP ratio of 4.5%, subsequently reducing to 3.5% in 2027. Ongoing improvements in tax administration and legislation will support overall budget revenues, which are projected at 25.8% of GDP. Expenditures, according to the ADB forecast, will reach 30.3% of GDP in 2026, with social spending and capital expenditures remaining a priority-the latter is projected at around 5.8% of GDP. Assuming no potential pressure on the Armenian dram exchange rate due to high external uncertainty, public debt is projected at 51.5% of GDP by the end of 2026, stabilizing around 52% of GDP in the medium term. The current account deficit is projected to widen to 6.1% of GDP in 2026 before narrowing to 5.6% in 2027. This reflects the impact of the conflict in the Middle East through increased transportation costs, trade disruptions, and higher import prices. The trade deficit is projected to widen to 10.7% of GDP in 2026 and 2027, amid disruptions to export markets and supply chains. Merchandise exports are expected to increase by 11% in 2026 and 17.9% in 2027, driven by increased shipments of base metals, manufactured goods, and processed food products. Merchandise imports are projected to increase by 15.9% in 2026 and 15.7% in 2027, reflecting continued need for capital goods imports for large public and private investment projects. The ADB expects the services sector surplus to narrow in 2026 and then recover in 2027, reflecting weakening tourism, slowing financial flows, and conflict-related pressure on transport services. The primary income deficit is expected to gradually narrow as payments to non-residents decline and income growth moderates.
A Policy Challenge: Promoting Capital Market Reforms to Diversify the Economy
In recent years, Armenia's capital market has undergone significant changes, marked by a series of reforms aimed at deepening market activity and supporting economic diversification. These reforms focused on strengthening market infrastructure, expanding the investor base, and implementing sustainable finance standards. Despite these achievements, Armenia's capital market remains shallow and underdeveloped, dominated by government securities. Corporate bonds and equities account for only a small share of activity, and the investor base is concentrated among banks and pension funds, with limited participation from foreign and retail (private) investors. To address existing challenges and create a more diversified and growth-oriented financial system, Armenia has initiated a large-scale program to strengthen and develop its capital market. The goal is to expand the range of available instruments, attract a broader and more diverse range of investors, improve governance and transparency, and embed sustainability principles in long-term private sector financing. The government has strengthened Armenia's capital market infrastructure and expanded the range of available financial instruments. Bond switch auctions were fully launched, and market-making rules for corporate bonds and inflation-indexed securities were introduced. The legislative framework has been modernized to support new financial instruments, clarify share classes, and improve corporate governance standards. Furthermore, regulation of derivatives and digital assets was strengthened with the adoption of the first comprehensive crypto-asset law.
The government expanded the investor base and strengthened corporate governance practices in the capital markets. Investment funds can now transition from private to public status, and remote membership was introduced to facilitate the participation of foreign investors. The governance framework was strengthened with a new corporate governance code, the introduction of gender diversity principles, and enhanced disclosure requirements for listed companies. Progress was also made in integrating sustainable finance standards and environmental, social, and governance (ESG) principles throughout the financial system. The government adopted a national Green Taxonomy and Sustainable Finance Roadmap, incorporating ESG and climate risk considerations into prudential frameworks and reporting. Financial institutions are now required to integrate climate and environmental risks into their governance processes, strategies, and risk management systems.
The ADB, noting that capital market development is considered critical to increasing the availability of long-term financing and supporting investment, economic diversification, and sustainable growth, emphasized: "Further progress will require expanding access to market financing for corporations, infrastructure companies, municipalities, and state-owned enterprises; deepening the private securities market; expanding the participation of domestic, foreign, and retail investors; and addressing remaining regulatory, institutional, and human resource constraints. Strengthening financial literacy, increasing market liquidity, and ensuring consistent implementation of governance, disclosure, and sustainability standards will be key to supporting a more diversified and resilient capital market."
It should be noted that the Central Bank of Armenia, in its March forecast, predicted GDP growth of 7.1- 4.7% for 2026 and then 5.7-5.3% in 2027. According to the IMF forecast updated in December, Armenia's GDP growth will be 5.5% in 2026. Fitch Ratings, in its forecast updated in January, 2026, expects stable prospects for economic growth in Armenia - above 5% in 2026-2027. S&P Global Ratings, in its forecast updated in February of this year, announced a slowdown in Armenia's GDP growth in 2026 to 5.3% and then to 4.8% in 2027, after which the rate will slightly accelerate to 5% in 2028. Armenia's draft state budget for 2026 includes GDP growth of 5.4%. According to the Statistical Committee of the Republic of Armenia, Armenia's GDP growth, after accelerating from 5.8% to 12.6% in 2022, slowed to 8.3% in 2023 and then to 5.9% in 2024. In 2025, the rate accelerated to 7.2%, reaching AMD 11.318 trillion (over $29.2 billion) in absolute terms. The GDP deflator index also increased from 106.9% to 108% in 2022, decreasing to 103.1% in 2023 and to 101.4% in 2024. However, it increased to 103.6% in 2025.
