2022 Armenia economy: an interview with Vahan Kerobyan

Silvia Boltuc, SpecialEurasiaManaging Director, and Vahan Kerobyan, the Minister of Economy of Armenia (Credits: SpecialEurasia)

Geopolitical Report ISSN 2785-2598 Volume 24 Issue 8
Author: Giuliano Bifolchi & Silvia Boltuc

After the pandemic and the 2020 Nagorno-Karabakh Conflict, the Armenian economy started recovering in 2021, registering significant growth in 2022 with an optimistic forecast for the following year.

In 2020 Armenia faced, as the entire international system, the pandemic, which caused internal problems in its economic sectors. During the same year, the South Caucasus witnessed the 2020 Nagorno-Karabakh Conflict, which changed regional geopolitics and influenced the Armenian socio-political and financial system.

If the year 2020 hugely affected Armenian economic performance, since 2021, the country has started recovering, registering positive trends. Indeed, in its 2022 October Europe and Central Asia (ECA) Economic Update, the World Bank expects Armenia’s economy to grow by 7% in 2022, 4.3% in 2023 and 5.2% in 2024.

During the official mission in Yerevan for the project “Discovering & Analysing Armenia”, SpecialEurasia met Vahan Kerobyan, the Minister of Economy of the Republic of Armenia, to investigate current Armenian economic trends and performance, the main drivers’ sectors, investment opportunities and fiscal policy.

What is the current situation of the Armenian economy?

“This year, Armenia’s economy is growing; its GDP growth is 14%, and we will land at 15% at least. Growth comes from different sources; first of all, the inflow from the Russian people who relocated here after the Ukraine conflict started. Currently, we have 116 thousand of Russian citizens who have moved to Armenia: half of them have Armenian origins, and the other half are Russians.

They come to Armenia because we are probably the most pleasant environment due to our democracy, city’s safety, low violent crime, and healthcare structures. Furthermore, the Russian language is widely spoken in our country.

The biggest problem we have now is the high rental prices because the demand has surged due to the Russian migration to our country, but we are trying to slow down, although, after the partial mobilisation in Russia, Armenia experienced other migration flow from Russia.

The Russians have registered work in Armenia in the IT sector. Therefore, since the beginning of the year, we have reported an increase of more than 50% increase in IT jobs. The Russian presence in our country, I might say, is the first contributor to the growth of our economy and the internal demand. Also, Armenian export to Russia has increased, and our country’s products currently have a significant stake in the Russian market.”.

Which are the leading economic sectors in Armenia?

“The three main drivers in the Armenian economy are the IT sector, manufacturing, and internal demand. Indeed, our Government program aims to improve the manufacturing sectors (metallurgy, chemical industry, mining and jewellery, textile, solar panels and system), attract foreign direct investments (FDIs) and construction. Of course, we also focus much on agriculture since we would like to guarantee food security.

We have great potential in the solar energy sector because of our expertise and low prices. Therefore, Armenia is assessing the opportunity to cooperate with other countries, such as Kazakhstan, Uzbekistan, the United States, and Canada, where we can sell our products.

We have a connection with Italy and the fashion field in the textile sector. Indeed, recently we visited Milano Fashion Week, and an Italian business delegation recently came to Armenia to understand how we might cooperate. Also, several big companies in Armenia work for Italian brands such as Max Mara and Moncler, but we have also developed our own brands.”.

Could you give us more information about economic relations and partnerships between Armenia and the Eurasian Economic Union (EAEU) members?

“We are part of the EAEU. Trade between Armenia and other member states has increased by more than 50%. Due to the sanctions against Moscow, internal trade has been activated.

But I should say that we do not cooperate only inside the EAEU because, in latest years, we have increased our trade with European countries and regional actors such as the Islamic Republic of Iran.

If we talk about FDIs, this year, the leading country is the Russian Federation because, as I mentioned earlier, the relocation of a considerable number of Russian citizens has driven the market. We also have FDIs from European countries. For instance, we have developed bilateral relations with European countries, first of all Germany. In addition, we have several Italian investors this year in textile and agriculture.

If we focus the attention on Central Asian countries (some of them are EAEU members), we evaluate this market as important even though we have logistic connectivity problems and the pandemic and recent sanctions have influenced the cooperation. We have projects to increase our connectivity with Central Asia, particularly Kazakhstan and Uzbekistan, where we sell agriculture and solar panels products.”.

Regarding Italy-Armenia economic relations, what are the current status and possible future developments?

“Italy and Armenia cooperate in agriculture which is our leading collaborating sector. Everything in the agriculture sector is from Italy (machinery, technology) and now we have started selling our products to Central Asian counties, therefore promoting the Italian brands.

Italy exports to Armenia its know-how. Now we have a Government program, which promotes incentives in gardening, where Italy has a special place, and greenhouse, where Germany and France lead the sector.”.

What about the special economic zones in Armenia?

“Unfortunately, we should develop from scratch our free economic zones. We have planned to develop a free economic zone in Shirak, but the project is at its initial stage and will take 2-3 years to come to life.”.

During these days, international media covered the opening of the Iranian consulate in Syunik, emphasising the crucial relations that Yerevan has with Tehran. What about Iran-Armenia economic cooperation?

“Armenia and Iran have seven thousand years of historical cooperation, and the most significant foreign community in Iran is Armenian.

The Iranian describe their economy as a “resistance economy”, and Tehran is reluctant to export its national products. Therefore, Armenia sells energy to Iran thanks to a common swap system. Tehran exports natural gas to Yerevan, and we give them electricity.

Apart from that, Armenian export to Iran is nominal. Although the trade is growing, we can understand the Iranian position and cannot force Tehran to buy our products. Nevertheless, our trade is growing. When I became a minister in 2020, the Armenian-Iran trade was 400 billion dollars, last year was 500 billion dollars, and for this year, I believe we will end up with 800 billion dollars or even more.”.

Will Armenia benefit from the International North-South Transport Corridor (INSTC), or are there any logistic projects Yerevan is promoting?

“Armenia is part of the INSTC, but the project is not ratified. We are developing a project to set up fast logistics connectivity from India to Europe by passing to Iran and Georgia. We do not want only to interest India but also the Gulf-Arab country.

This means that through Armenia, logistic corridors might go to Europe, crossing the Black Sea or to the Russian market following the route of the INSTC.

We have European banks supporting our logistic project to link India with European Union. We are in the tender process now and have the EBRD as financial partners.”.