Before the COVID-19 pandemic, Armenia was making gradual improvements to its business environment and establishing a track record of prudent macroeconomic policy management. Economic growth was strong, averaging 6.8 percent during 2017-19.
Armenia’s progress was derailed in 2020. It suffered a severe COVID-19 outbreak, with a new surge in the first quarter of 2021, ranking 33rd globally in recorded cases per million population. Meanwhile, the country’s conflict with Azerbaijan escalated to a heavy military confrontation at end-September 2020. Although the November 10th ceasefire halted hostilities, Armenia has since entered a period of heightened domestic political instability.
These twin shocks led to a sharp economic contraction, increased poverty, and fiscal deterioration. Nevertheless, Armenia has maintained overall macroeconomic stability and healthy external buffers through the crisis.
