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4
                                                 ARMENIA’S ECONOMIC PULSE




 CONTENTS
ACKNOWLEDGEMENTS.......................................................................................................              

ABBREVIATIONS AND ACRONYMS ..................................................................................... 6

EXECUTIVE SUMMARY.........................................................................................................           7

INTRODUCTION.....................................................................................................................    

1. RECENT MACROECONOMIC DEVELOPMENTS AND OUTLOOK.................................                                                    

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2. SPECIAL TOPIC: PROMOTING COMPETITION IN ARMENIA FOR FASTER, MORE
INCLUSIVE, AND PRODUCTIVITY-LED GROWTH............................................................... 

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ANNEX 1: MACROECONOMIC INDICATORS....................................................................... 

ANNEX 2: CONCENTRATION AND LABOR PRODUCTIVITY (2018-2019).......................... 

REFERENCES......................................................................................................................... 




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6
                                          ARMENIA’S ECONOMIC PULSE



EXECUTIVE SUMMARY

Following two years of exceptional growth                   DQG FDSLWDO H[SHQGLWXUH %\ HQG$XJXVW SXEOLF
(2022-2023), economic activity began to                     GHEWUHPDLQHGVWDEOHDWSHUFHQWRI*'3
normalize in 2024 as GDP growth eased to 5.9
percent, and then to 5.6 percent in H1 2025,                Projections show a moderate growth outlook,
ZKLOHLQÀDWLRQDU\SUHVVXUHVUHHPHUJHG The                 with some risk. *URZWKLVSURMHFWHGWRPRGHUDWH
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urban areas.                                                IXUWKHUGDPSHQLQJJURZWK


7KH FXUUHQW DFFRXQW GH¿FLW ZLGHQHG WR             Bold structural reforms are essential to
percent of GDP in H1 2025 as the goods and                  advance the Government’s ambitious agenda,
services balance deteriorated. Exports and                  embodied in strategies such as the 2021-
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8
      PART I
  RECENT MACROECONOMIC
DEVELOPMENTS AND OUTLOOK
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 Armenia’s growth gradually moderated in                      3. On the supply side, H1 2025 growth was
 2024 and H1 2025 as the temporary growth-                    driven by services and construction. 1RQ
 driving factors dwindled.                                    WUDGH VHUYLFHV WKH ODUJHVW FRQWULEXWRU WR JURZWK
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 1. Over the past 25 years, Armenia’s growth                  \R\ ZLWK JDLQV DFURVV DOO VXEVHFWRUV H[FHSW
 has exhibited pronounced cycles, driven by                   WUDQVSRUWDWLRQ ZKLFK GHFOLQHG  SHUFHQW
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10
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H[SDQGHGSHUFHQW\R\GULYHQE\LQFUHDVHV                       Figure 3: Among economic sectors, services
in both the wholesale and retail trades. Industrial                    made a significant contribution to GDP growth in
                                                                       H1 2025
RXWSXWFRQWUDFWHGSHUFHQW\R\GULYHQE\D                      Contributions to GDP growth, GDP growth (%)
SHUFHQW\R\GURSLQPDQXIDFWXULQJGXHWRD                                                      12.6
                                                                       10.0
VKDUSIDOOLQWKHSURGXFWLRQRIDOFRKROLFEHYHUDJHV                                                            8.3
                                                                                                                         5.9
                                                                                          5.8                                     5.6
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 SHUFHQW \R\ $JULFXOWXUH IRUHVWU\ DQG                      0.0
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                                                                        -5.0
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EUHHGLQJDFWLYLWLHV                                                           -7.2
                                                                               2020       2021          2022   2023     2024    2025 H1
                                                                               Services (excl. trade)        Trade       Construction
                                                                               Industry (excl. construction)          Agriculture
                                                                               GDP
Figure 1: Armenia’s historical GDP growth rates                        Source: SC, staff calculations
(from 2000 to H1 2025)
GDP growth (%)
                11.2
                                                10.5                  $YHUDJH LQÀDWLRQ SLFNHG XS LQ WKH ¿UVW HLJKW
                                                                      2025.
   6.3                                                  5.8
                                        3.8                            $YHUDJH LQÀDWLRQ JUDGXDOO\ URVH IURP 
                            1.3                                       percent in January 2025 to 3.2 percent in
                                                                      August 2025 (Figure 4), largely driven by food
2000-24 2000-08 2009-16 2017-21 2022-23 2024-25
Source: SC, staff calculations
                                          (H1)                        prices (Figure 5).)RRGSULFHLQÀDWLRQDYHUDJHG
                                                                       SHUFHQW RYHU WKH -DQXDU\$XJXVW SHULRG
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                                                                      DQG E\ WKH GHSUHFLDWHG H[FKDQJH UDWH DJDLQVW
                                                                      WKH5XVVLDQUXEOH58%UDLVLQJWKHFRVWRIIRRG
Figure 2: GDP growth remained robust in H1
2025, driven by private consumption                                   LPSRUWV IURP $UPHQLD¶V PDLQ VXSSOLHU 3ULFHV
Contributions to GDP growth, GDP growth (%)                           IRU PRVW FRPPRGLW\ JURXSV DOVR URVH7KLV ZDV
                                                                      WKH FDVH IRU HGXFDWLRQ XS  SHUFHQW \R\
                                 12.6
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        2020      2021           2022   2023    2024   2025 H1
                                                                      XQFKDQJHG +HLJKWHQHG LQÀDWLRQDU\ ULVNV ZHUH
        Net export      Gross fixed capital formation
        Private consumption       Government consumption              FDXVHG E\ ULVLQJ JOREDO IRRG SULFHV JHRSROLWLFDO
        GDP                                                           WHQVLRQV VXSSO\ FKDLQ ULVNV ZHDNHQLQJ JOREDO
Source: SC, staff calculations
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                                                                                                                                        11
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Figure 4: Average inflation picked up over                                                                                                             7KH FXUUHQW DFFRXQW GH¿FLW UHDFKHG  SHUFHQW
January-August 2025, slightly exceeding the 3                                                                                                          RI DQQXDO *'3 LQ +  FRPSDUHG ZLWK 
percent target
 %                                                                                                                                                     SHUFHQWLQ+)LJXUH,Q+H[SRUWV
 12                                                                                                                                                    DQGLPSRUWVRIJRRGVIHOOSHUFHQW\R\DQG
 10                                                                                                                                                    SHUFHQW\R\UHVSHFWLYHO\7KHFRQWUDFWLRQ
                                                                         Policy rate
  8
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                                                                                                                                         6.75
                                                                                                                                                       collapse in the re-exports of precious stones and
  6
                                                                   Inflation target                                                                    PHWDOV HTXDO WR D WKLUG RI WRWDO H[SRUWV )LJXUH
  4                                                                                                                                           3.2
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 -2                                                                                                                                                    EDODQFHZLGHQLQJE\SHUFHQW\R\+RZHYHU
         May




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Source: CBA

                                                                                                                                                       6. Armenia was one of the largest bene¿FLDULHV
Figure 5: Inflation in food prices contributed to                                                                                                      of the rerouting of gold exports from
high inflation
                                                                                                                                                       Russia to non-Eurasian Economic Union
 %
                                                                                                                                                       (EEU) countries in 2024, a temporary surge
 9.0
                                                                                                                                                       that has since been fading. 5HH[SRUWV RI
 6.0                                                                                                                                                   SUHFLRXV VWRQHV DQG PHWDOV EHQH¿WHG $UPHQLD
                                                                                                                                                       ZKHQ 5XVVLD LQWURGXFHG D JROG H[SRUW GXW\ LQ
 3.0
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 0.0                                                                                                                                                   WRUHURXWHH[SRUWVWRWKHLUPDLQGHVWLQDWLRQVHJ
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                                                                                                                                                       ((8 FRXQWULHV LQFOXGLQJ $UPHQLD 5HPRYDO RI
       Jan-23
                Mar-23
                         May-23
                                   Jul-23
                                            Sep-23
                                                     Nov-23
                                                              Jan-24
                                                                       Mar-24
                                                                                May-24
                                                                                         Jul-24
                                                                                                  Sep-24
                                                                                                           Nov-24
                                                                                                                    Jan-25
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                                                                                                                                      May25
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                                                                                                                                                       WKH H[SRUW GXW\ DW HQG$SULO  UHVXOWHG LQ D
                                                                                                                                                                                                           
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          Food and non-alcoholic bev.                                                                      CPI
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Source: SC.                                                                                                                                            5XVVLD¶VLQYDVLRQRI8NUDLQH
Note: Cumulative, compared with the same period in the previous year


                                                                                                                                                       7. After a slow start in early 2025, marked by
                                                                                                                                                       monthly declines, Armenia’s tourism sector
 The current accouQW GH¿FLW ZLGHQHG LQ +
                                                                                                                                                       rebounded strongly, with the May-August
 2025 as the goods and services balance
                                                                                                                                                       period     registering       record-high       monthly
 deteriorated.
                                                                                                                                                       arrivals. $  SHUFHQW \R\ LQFUHDVH LQ WKH
                                                                                                                                                       QXPEHU RI WRXULVW DUULYDOV RYHU WKH 0D\$XJXVW
 $UPHQLD¶VFXUUHQWDFFRXQWGH¿FLWZLGened                                                                                                          SHULRGFRPSHQVDWHGIRUDIDOOHDUOLHULQWKH\HDU
 in H1 2025, compared with the same period                                                                                                             7RWDO WRXULVW DUULYDOV LQ WKH ¿UVW HLJKW PRQWKV RI
 LQUHÀHFWLQJDGHWHULRUDWLQJJRRGVDQG                                                                                                         WKH \HDU UHDFKHG  PLOOLRQ VOLJKWO\ H[FHHGLQJ
 services balance.'HWHULRUDWLRQRFFXUUHGPRVWO\                                                                                                      WKH  PLOOLRQ UHFRUGHG RYHU WKH VDPH SHULRG
 LQ4WKHQPRGHUDWHG LQ4DVWRXULVPUHODWHG                                                                                                      LQ7KHUHFRYHU\FRPHVDIWHU¶VVOLJKW
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12
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                                                                      Figure 6: The current                        account     balance
                                                                      deteriorated in H1 2025
 5HPLWWDQFH LQÀRZV SDUW RI WKe income                         % of GDP
EDODQFH ZHUH ÀDW LQ  IROORZLQJ D VKDUS                    9.0

decline in 2024. 5HPLWWDQFHV PHDVXUHG E\                           6.0

WKH EDODQFH RI SD\PHQWV %R3 LQFUHDVHG                      3.0
                                                                                   0.7
SHUFHQW\R\LQ+DIWHUIDOOLQJSHUFHQW                      0.0
                                                                                                                        -1.6
                                                                                              -2.8
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5XVVLDQ QDWLRQDOV DQG EXVLQHVVHV UHORFDWLQJ WR                    -9.0
$UPHQLD EHFDXVH RI VDQFWLRQV D SHDN RI 86'                    -12.0
                                                                                   2022      2023       2024            2024    2025
 ELOOLRQ HTXDO WR  SHUFHQW RI *'3 ZDV                                                                    H1      H1
                                                                           Trade balance          Service balance
UHFRUGHGLQ6LQFHWKHQUHPLWWDQFHVVKDUSO\
                                                                           Income balance (including remittances)
GHFOLQHG RYHU WKH  SHULRG UHDFKLQJ
                                                                      Source: SC, CBA, staff calculations
86'  ELOOLRQ  SHUFHQW RI *'3 LQ 
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UHPLWWDQFHVFRQVWLWXWHGSHUFHQWRIDQQXDO*'3
LQGLFDWLQJ WKDW WKH $UPHQLDQ HFRQRP\ LV OHVV                   Figure 7: Re-exports, which drove export growth
                                                                      in 2024, normalized in H1 2025
GHSHQGHQW RQ UHPLWWDQFHV ZKHQ FRPSDUHG ZLWK
                                                                      USD, thousands
KLVWRULFDOO\ KLJK OHYHOV 2YHUDOO WKH SULPDU\ DQG              2,000
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                                                                       1,600
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VHUYLFHVEDODQFH
                                                                        800

7KHGH¿FLWLQWKH+FXUUHQWDFFRunt                            400

EDODQFHZDVPRVWO\¿QDQFHGE\WKHLVVXDQFH                                0
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                                                                               Sep

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(XURERQG WKH ¿IWK LQ WKH DPRXQW RI 86'                               2023                     2024               2025
PLOOLRQ ZDV LVVXHG LQ 0DUFK  SDUW RI LW                      Gold & jewelry                   Machinery & equipment
UH¿QDQFLQJWKHPDWXULQJ(XURERQG7KHVHFRQG                              Metals & minerals                Other primary
                                                                                                            Manufacturing
ODUJHVWH[WHUQDOGH¿FLW¿QDQFLQJLWHPZDVXQGHU                      Source: SC
³2WKHU,QYHVWPHQWV´LQWKHIRUPRIFXUUHQF\DQG


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                                                                                                                                        13
                                 FAIRER MARKETS FOR INCLUSIVE GROWTH


 Figure 8: Most re-exports of precious stones and                Figure 9: Remittances (by BoP) dropped sharply
 metals in 2024 went to UAE and China                            in 2024
 USD, thousands                                                  USD, millions                                          % of GDP
 2,000                                                           2,500 13.0                                                     14.0
 1,600                                                                        11.7
                                                                                  10.9      11.2 10.5                           12.0
                                                                 2,000
 1,200
                                                                                        10.4                                    10.0
     800                                                                                                6.1
                                                                 1,500
                                                                                                                                8.0
                                                                                                              4.7
     400
                                                                                                                                6.0
                                                                 1,000
      0
                                                                                                                    2.1 2.0 4.0
           May




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                                                                   500
                                                                                                                                2.0
              2023              2024                2025
                                                                      0                                                         0
              Russia        China         Other countries                 2017 2018 2019 2020 2021 2022 2023 2024   2024 2025
                                                                                                                     H1   H1
              EU            UAE
                                                                      Remittances, mln USD                Remittances
 Source: SC                                                      Source: SC, CBA, staff calculations




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           In 2022, arrivals from Russia more than doubled, with approximately 440,000 additional
           entries compared with 2021.:KLOHHVWLPDWHVVXJJHVWWKDWEHWZHHQDQG5XVVLDQ
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14
                                                       ARMENIA’S ECONOMIC PULSE


10. Over January-August 2025, the dram                                            Figure 11: International reserves grew in
(AMD) appreciated against the US dollar                                           January-August 2025
                                                                                       USD                                                     months of
(USD) but depreciated against the euro                                                millions                                                  import
                                                                                   4,500                                                               8.0
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                                                                                   1,500
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DQG $XJXVW WKH $0' KDG GHSUHFLDWHG                                          0                                                              0.0
                                                                                            2019 2020 2021 2022 2023 2024 2025
SHUFHQW \R\ DJDLQVW WKH 58% DQG  SHUFHQW                                              Gross international reserves (LHS)
                                                                                                   Goods & Services import cover (RHS)
\R\DJDLQVWWKH(85$VWKH58%DSSUHFLDWHG
                                                                                  Source: CBA, staff calculations
$UPHQLDQ SURGXFWV EHFDPH UHODWLYHO\ FKHDSHU
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SDUWQHU DV HYLGHQFHG E\ WKH  SHUFHQW \R\                            grew as expenditure rose, while public debt
GHFUHDVHLQWKH5((5LQ$XJXVWFRPSDUHG                                     UHPDLQHGÀDW
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                                                                                   January-August 2025 period reached 0.6
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                                                                                   percent of annual projected GDP, well below
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                                                                                   the 5.5 percent of GDP expected. This follows a
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Figure 10: Armenia is gaining competitiveness                                      H[SDQGHG  SHUFHQW \R\ LQ QRPLQDO WHUPV
as the REER depreciates                                                            EXR\HGE\VXEVLGLHVSHUFHQW\R\DQGE\
Index (2010=100)                                                                   VRFLDODOORZDQFHVDQGSHQVLRQVSHUFHQW\R\
 360
                                                            2025 Aug               VRFLDO SD\PHQWV WR UHIXJHHV KDYLQJ FRQWLQXHG
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 120                                                                               E\ VFKRRO FRQVWUXFWLRQ DQG UHKDELOLWDWLRQ DV
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                                                                                                                                                          15
                                     FAIRER MARKETS FOR INCLUSIVE GROWTH


 5HYHQXH JUHZ  SHUFHQW \R\ IURP 9$7                                   PLOOLRQ(XURERQG
 WKH ODUJHVW WD[ LWHP DQG DOPRVW D WKLUG RI WRWDO
 WD[UHYHQXHDQGSHUFHQW\R\IURPLQFRPH                                   7KH¿QDQFLDOVHFWRU remains sound, supported
 tax 6 WKHVHFRQGODUJHVWWD[LWHP7XUQRYHUWD[                               by strong credit growth, low non-performing
 FROOHFWLRQLQFUHDVHGSHUFHQW\R\UHÀHFWLQJ                               loans (NPLs), and solid capital buffers.
 DQLQFUHDVHLQWXUQRYHUWD[UDWHVDSSOLFDEOHVLQFH
 the start of 2025.                                                                 $V RI $XJXVW  ¿QDQFLDO VHFWRr
                                                                                   credit grew faster than deposits (yoy). /RDQV
 12. Government debt, as a percentage of                                           LQFUHDVHG  SHUFHQW \R\ ZKHUHDV GHSRVLWV
 *'3 UHPDLQHG DOPRVW ÀDW DW  SHUFHQW                                   URVHSHUFHQW\R\LQQRPLQDOWHUPV)LJXUH
 by end-August 2025, below the 50 percent                                           *URZWK RI ERWK FUHGLW DQG GHSRVLWV ZDV
 Fiscal Rule second threshold.$W HQG$XJXVW                                    JHQHUDOO\ GULYHQ E\ $0'GHQRPLQDWHG IXQGV
 GRPHVWLF GHEW DFFRXQWHG IRU  SHUFHQW RI WRWDO                           ,Q -DQXDU\$XJXVW  WKH FUHGLW GROODUL]DWLRQ
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 ZDV LQ DOLJQPHQW ZLWK WKH *RYHUQPHQW¶V ±                                RYHUWKHVDPHSHULRGZDVKLJKHUDWSHUFHQW
  'HEW 0DQDJHPHQW 6WUDWHJ\ WR UHGXFH WKH                                DOEHLWVWLOOORZHUWKDQWKHSHUFHQWDYHUDJHRYHU
 share of external debt to total debt and increase                                 WKH  SHULRG )LJXUH $V RI$XJXVW
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                                                                                   FRQVXPHU ORDQV LQFUHDVLQJ  SHUFHQW \R\
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                                                                                   VHUYLFH REOLJDWLRQV ZKLFK FRXOG EHFRPH PRUH

Figure 12: The budget recorded a lower deficit in H1 2025
% of GDP
  35
  30
  25
  20
  15
  10
     5
     0
                                                                                            -1.9                                  -0.6
                              -2.6                                     -2.2 -2.8
     -5                                           -4.5 -4.9                                        -3.0       -3.5 -3.3
                       -5.1
 -10
                    2020                   2021                      2022                2023              2024               2025

              Total revenue and grants                        Total expenditure           Fiscal balance          Fiscal balance plan

Source: Staff calculations; Ministry of Finance


 7KLVLQFOXGHVWKHPRUWJDJHUHODWHGLQFRPHWD[UHIXQG
 7KHLQFUHDVHLQPRUWJDJHORDQVZDVGULYHQE\DPRUWJDJHLQWHUHVWWD[FUHGLWZKLFKLVEHLQJJUDGXDOO\SKDVHGRXWVLQFHWKHEHJLQQLQJ
 of 2025.



16
                                                             ARMENIA’S ECONOMIC PULSE


EXUGHQVRPHXQGHUWLJKWHU¿QDQFLDOFRQGLWLRQVRU                           Figure 15: CAR and NPL ratios remain sound
PDFURHFRQRPLFVWUHVV7KHSDFHDQGFRPSRVLWLRQ                            %
                                                                               22.0                                             6.0
RI FUHGLW JURZWK ZDUUDQWV FORVH PRQLWRULQJ IRU
VLJQV RI RYHUKHDWLQJ 7KH DYHUDJH LQWHUHVW UDWH
IRU$0'ORDQVDERYH\HDUZDVSHUFHQW                                 20.0                                             4.0

RYHU WKH -DQXDU\$XJXVW  SHULRG FORVH WR
WKHSHUFHQWRIWKHVDPHSHULRGLQ                                  18.0                                             2.0


 %DQN SUR¿WDELOLW\ DQG FDSLWDOL]DWLRQ                                  16.0                                             0.0
strengthened, and asset quality remained                                              2019 2020 2021 2022 2023 2024 2025
                                                                                                                    Aug
high and stable.7KH13/UDWLRWRWRWDOORDQVZDV                                           CAR         NPL (RHS)
                                                                           Source: CBA
ORZLQWKH¿UVWHLJKWPRQWKVRIVWDELOL]LQJDW
DWHQG$XJXVWLGHQWLFDOWRWKHUDWLR                       /DERU PDUNHW FRQGLWLRQV UHPDLQHG VWDEOH
DW HQG )LJXUH  GXH WR EDG ORDQ ZULWH                    in H1 2025, with employment falling slightly
RIIV7KHFDSLWDODGHTXDF\UDWLR&$5UHPDLQHG                           amid slowing wage growth.
ZHOO DERYH UHJXODWRU\ UHTXLUHPHQWV VWDQGLQJ DW
SHUFHQWLQ$XJXVWVLPLODUWRHQG                         15. Employment in H1 2025 remained almost
5HWXUQ RQ DVVHWV DOVR VWDELOL]HG DW  RYHU WKH                  stable (yoy) at slightly over 50 percent. By
VDPHSHULRG                                                               H1 2025, Armenia’s employment rate stood
Figure 13: Credit and deposits maintained                                  at 50.6 percent.7KLV LV VOLJKWO\ KLJKHU WKDQ WKH
double-digit growth through August 2025                                     SHUFHQW RYHU WKH VDPH SHULRG LQ  EXW
%
                                                                           ORZHU WKDQ LWV SHDN RI  SHUFHQW LQ + 
 30.0
                                                                    26.6   GXHWRWKHLQÀRZRIPLJUDQWVDQGZRUNHUVIURP
 20.0                                                                      5XVVLDPRVWO\LQWKH,&7VHFWRU6LPLODUO\DIWHU
                                                                    15.8
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-10.0
            2020       2021     2022     2023        2024     2025
                                                              Aug
                                                                           &RPSDUHGZLWKWKHVDPHSHULRGLQWKH
                      Bank credits (end year)                              GHFOLQHLQXQHPSOR\PHQWZDVPRVWO\GXHWROHVV
                      Bank deposits (end year)
Source: CBA                                                                XQHPSOR\PHQWDPRQJPDOHVDQGLQXUEDQDUHDV
                                                                           )HPDOH XQHPSOR\PHQW  SHUFHQW UHPDLQHG
Figure 14: Credit dollarization stabilized at 33
percent over January-August 2025                                           QRWDEO\ KLJKHU WKDQ PDOH XQHPSOR\PHQW 
%                                                                          SHUFHQW 1RQHWKHOHVV ODERU PDUNHW VLJQDOV
60.0
                                                                           VXJJHVW VWURQJ GHPDQG IRU ODERU VXSSRUWHG E\
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 0.0
          Jan


                May


                          Sep


                                Jan


                                       May


                                               Sep


                                                       Jan


                                                              May




                   2023                 2024                 2025
                            Dollarization of loans
                            Dollarization of deposits
Source: CBA

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                                                                                                                                  17
                                FAIRER MARKETS FOR INCLUSIVE GROWTH


Figure 16: Employment remained stable in H1                              WUDQVODWHV LQWR SRYHUW\ EHLQJ GLVSURSRUWLRQDWHO\
2025                                                                     FRQFHQWUDWHGLQUXUDODUHDVKRPHWRSHUFHQW
%
 60                                                           15
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 50                                                           12
                                             50.7     50.6
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                                             6.4                         ODERU LQFRPH VRXUFHV LQFOXGLQJ UHPLWWDQFHV
 30                                                    5.6    6
                                                                         VRFLDO WUDQVIHUV DQG ZDJH JDLQV LQ FHUWDLQ
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                                             13.9     13.1               VHFWRUVSOD\HGDQLPSRUWDQWFXVKLRQLQJUROH7KLV
 10                                                           0          UHLQIRUFHV WKH QHHG WR VWUHQJWKHQ ODERU PDUNHW
       2020     2021     2022      2023     2024 2025 H1
                                                                         RSSRUWXQLWLHV IRU VXVWDLQHG SRYHUW\ UHGXFWLRQ
      Average monthly nominal wages (growth %) RHS
      Employment rate              Unemployment rate                     JLYHQ WKDW SRYHUW\ UHPDLQV KLJKHVW DPRQJ WKH
      Labor force participation rate                                     XQHPSOR\HG DQG DPRQJ KRXVHKROGV GHSHQGHQW
Source: SC
                                                                         RQ ORZSURGXFWLYLW\ DJULFXOWXUH ,W LV DOVR ZRUWK
                                                                         H[DPLQLQJ KRZ EHWWHUIXQFWLRQLQJ PDUNHWV FDQ
                                                                         VXSSRUWLQFOXVLYHJURZWK)RRGSURGXFWVDQGQRQ
 16. Average monthly nominal wages over the
                                                                         DOFRKROLFEHYHUDJHVDFFRXQWIRUDERXWSHUFHQW
 January-August 2025 period grew 5.6 percent
                                                                         RIWKHFRQVXPSWLRQEDVNHWZLWKWKLVSHUFHQWDJH
 (yoy), less than the 6.4 percent (yoy) in 2024.
                                                                         HYHQJUHDWHUDPRQJWKHSRRU:HDNFRPSHWLWLRQ
 7KHDYHUDJHPRQWKO\QRPLQDOZDJHJUHZWR$0'
                                                                         LQWKHVHPDUNHWVRUDORQJWKHVXSSO\FKDLQDQG
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                                                                         LQFOXGLQJ UHWDLO FDQ DIIHFW SULFH VWLFNLQHVV DQG
  XS IURP $0'  RYHU WKH VDPH
                                                                         therefore household expenditure and disposable
 SHULRGLQ3XEOLFVHFWRUQRPLQDOZDJHVURVH
                                                                         LQFRPH *OREDOO\ DSSUR[LPDWHO\  SHUFHQW RI
 SHUFHQW\R\WR$0'HTXDOWR86'
                                                                         GHWHFWHGHFRQRPLFFDUWHOVDIIHFWEDVLFFRQVXPHU
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                                                                         PHGLFLQHVDQGK\JLHQHSURGXFWVDQGSHUFHQW
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                                                                         DIIHFWWKHZKROHVDOHDQGUHWDLOWUDGHV0RUHRYHU
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                                                                         RWKHU WKDQ ZRUNLQJ LQ IDUPLQJ DFWLYLWLHV WKH
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                                                                         SRRU DUH DOVR HQJDJHG LQ WKH VHUYLFHV VHFWRU
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 LQÀDWLRQDWSHUFHQW


 17. Measured against the upper-middle-income
 poverty line (UMIPL) of USD 8.3 per capita per
 day (2021 PPP), poverty in Armenia grew from
 55.7 percent in 2022 to 56.9 percent in 2023,
 before falling to 56.2 percent in 2024.93RYHUW\
 UHPDLQVKLJKHVWLQUXUDODUHDVZKHUHWKH80,3/
 UDWHZDVSHUFHQWLQFRPSDUHGZLWK
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 ZKHQH[SUHVVHGLQ333WKDQLQ333



18
                                                ARMENIA’S ECONOMIC PULSE



                   1.2 Looking Ahead                                     ,QÀDWLRQLVSURMHFWHGWRHDVHWo 3 percent10
                                                                         in 2025 and stabilize over the medium term
        A. Economic growth is expected to                                7DEOH  6WDUWLQJ LQ 4 DYHUDJH LQÀDWLRQ LV
        moderate, given global uncertainty                               H[SHFWHG WR VORZ IURP LWV FXUUHQW UDWH RI 
                                                                         SHUFHQW DQG UHDFK  SHUFHQW E\ \HDUHQG 7KH
18. Growth is projected to ease to 5.2 percent                           SURMHFWHG KLJKHU LQÀDWLRQ LQ  FRPSDUHG
in 2025, down from 5.9 percent in 2024,                                  ZLWK  SHUFHQW LQ  LV ODUJHO\ DWWULEXWHG WR
as consumption and investment growth                                     ORZ EDVH HIIHFWV DV FRQVXPHU SULFHV GHÀDWHG
moderate slightly from their high bases.                                 RYHU WKH ¿UVW HLJKW PRQWKV RI  ,QÀDWLRQDU\
7KLVLVFORVHWRWKH*RYHUQPHQW¶V0HGLXP7HUP                           SUHVVXUHVDUHPL[HGGHFOLQLQJJOREDOFRPPRGLW\
([SHQGLWXUH )UDPHZRUN 07() ±                               SULFHV FRXOG HDVH LQÀDWLRQ EXW HVFDODWLQJ
WDUJHW RI  SHUFHQW LQ  ,W UHSUHVHQWV DQ                 JHRSROLWLFDOWHQVLRQVVKLIWLQJWUDGHSROLFLHVDQG
DYHUDJHRISHUFHQWLQWKHPHGLXPWHUPEDVHG                        potential supply chain disruptions present upside
RQH[SHFWDWLRQVRIVXVWDLQHGFDSLWDOH[SHQGLWXUHV                      ULVNV +RZHYHU JLYHQ$UPHQLD¶V VXVWDLQHG ORZ
WKHFRPPHQFHPHQWRIRSHUDWLRQVDWWKH$PXOVDU                           LQÀDWLRQDU\ HQYLURQPHQW DQG WKH &%$¶V DFWLYH
JROG PLQH XQLQWHUUXSWHG 6RWN PLQLQJ DFWLYLW\                     PRQHWDU\ SROLF\ XQGHU LWV LQÀDWLRQWDUJHWLQJ
DQG SURGXFWLYLW\HQKDQFLQJ UHIRUPV %\                         UHJLPHLQÀDWLRQLVH[SHFWHGWRVWDELOL]HDWWKH
JURZWK LV H[SHFWHG WR FRQYHUJH DW  SHUFHQW                   SHUFHQWWDUJHWLQWKHPHGLXPWHUP
FORVH WR LWV SRWHQWLDO UDWH )LJXUH  ,Q ±
 ERWK SULYDWH FRQVXPSWLRQ DQG LQYHVWPHQW
                                                                         7KH¿VFDOGH¿FLWLVH[SHFWHGWRFOLPEWR 5
DUHH[SHFWHGWREHWKHPDLQFRQWULEXWRUVWR*'3
                                                                         percent of GDP in 2025, up from 3.5 percent
JURZWKVXSSRUWHGE\WKH*RYHUQPHQW¶VDPELWLRXV
                                                                         of GDP in 2024. The planned expansion in
SXEOLFLQYHVWPHQWDJHQGDDQGRQJRLQJHIIRUWVWR
                                                                         H[SHQGLWXUH IRU  ZDV GULYHQ E\ GHIHQVH
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                                                                         UHIXJHH LQWHJUDWLRQ LQFOXGLQJ VRFLDO DVVLVWDQFH
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                                                                         SURWHFWLRQ DQG GHEW VHUYLFLQJ $OWKRXJK WKH
DQG H[WHUQDO GHPDQG IURP NH\ WUDGLQJ SDUWQHUV
                                                                         GH¿FLW UHPDLQHG ORZ DW HQG$XJXVW UHODWLYH
slows.
                                                                         WR WKH EXGJHW SODQ H[SHULHQFH IURP SUHYLRXV
                                                                         \HDUV VXJJHVWV WKDW PRVW FDSLWDO H[SHQGLWXUH
Figure 17: Private consumption and investment
will continue to drive growth, while net exports                         ZLOO PDWHULDOL]H LQ WKH ¿QDO IRXU PRQWKV RI WKH
fall                                                                     \HDUHQDEOLQJWKH*RYHUQPHQWWRIXO¿OLWVDQQXDO
% and percentage points
                                                                         FDSLWDO H[SHQGLWXUH SODQ $OWKRXJK *'3 JURZWK
15
                                                                         LV H[SHFWHG WR PRGHUDWH LW ZLOO UHPDLQ FORVH WR
10
                                                                         LWV SRWHQWLDO OHYHO KRZHYHU D FRPELQDWLRQ RI D
 5                                                                       VORZHU JURZWK PRPHQWXP D ZLGH ¿VFDO GH¿FLW
 0                                                                       DQG FXUUHQW DFFRXQW SUHVVXUHV FRXOG KHLJKWHQ
                                                                         YXOQHUDELOLWLHV LI OHIW XQDGGUHVVHG 5HFRJQL]LQJ
 -5
                                                                         WKHVH ULVNV WKH 0LQLVWU\ RI )LQDQFH DPHQGHG
-10
                                                                         WKH 7D[ &RGH WR H[SDQG WKH UHJXODU WD[ UHJLPH
-15                                                                      DQG OLPLW DOWHUQDWLYH UHJLPHV ZLWK WKH DLP RI
      2020   2021    2022    2023    2024 2025f 2026f 2027f
                                                                         LQFUHDVLQJ WD[ FROOHFWLRQ DQG SURYLGLQJ D IDLUHU
      Private Consumption             Government Consumption
                                                                         DQGPRUHHTXDOSOD\LQJ¿HOGIRUEXVLQHVVHV
      Investment            Net Export        GDP growth

Source: SC and World Bank staff projections


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                                                                                                                                 19
                                  FAIRER MARKETS FOR INCLUSIVE GROWTH


 Table 1: Key macroeconomic projections
  Key macroeconomic indicators                                 2022          2023       2024        2025p       2026p        2027p
  Real GDP growth, at constant market prices                    12.6         8.3         5.9          5.2         4.9          4.7
  Employment rate (% of working-age population,
                                                                50.9         52.8       50.7
  15 years+)
  Average inflation (CPI)                                       8.6          2.0         0.3          3.0         3.0          3.0
  Current account balance (% of GDP)                            0.7          -2.8        -4.6        -5.0         -4.9        -4.8
  FDI (% of GDP)                                                4.7          2.2         0.3          2.1         2.4          2.7
  Fiscal balance (% of GDP)1                                    -2.2         -1.9        -3.5        -5.0         -4.2        -3.7
  Revenue (% of GDP)                                            25.1         25.9       26.5         26.7        26.7         27.0
  Total expenditure (% of GDP)                                  27.3         27.8       29.9         31.7        30.9         30.7
     Current expenditure (% of GDP)                             22.2         22.2       24.0         25.5        24.5         24.1
     Capital expenditure (% of GDP)                             5.1          5.6         5.9          6.2         6.5          6.6
  Debt (% of GDP)       2
                                                                46.7         48.2       48.0         51.3        53.4         55.4
  Upper middle-income poverty rate
                                                                55.7         56.9       56.2         55.0        54.1         53.1
  (USD 8.3 in 2021 PPP)
 Source: World Bank MFMOD simulations
 Note: 2025–2027 values are World Bank staff estimations


 &RQWLQJHQW RQ DGHTXDWH HQIRUFHPHQW WKH WD[                     WKHLQÀRZRIWUDQVIHUVDQGPLJUDQWVFRPLQJWRDQ
 SROLF\UHIRUPV are expected to increase the ratio
                   
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 RIWD[WR*'3E\SSRYHUWRUHDFK                      WKHJRRGVDQGVHUYLFHVWUDGHEDODQFH
 SHUFHQWRI*'3E\7KLVZLOOIDFLOLWDWH
 ¿VFDO FRQVROLGDWLRQ RYHU WKH PHGLXP WHUP 7KH                  22. The poverty rate under UMIPL is projected
 ¿VFDOGH¿FLWLVIRUHFDVWWRGHFOLQHIURPSHUFHQW                   to fall gradually to 53.1 percent in 2027, down
 LQWRSHUFHQWE\*RYHUQPHQWGHEW                      from 56.2 percent in 2024. +RZHYHU VHYHUDO
 LV H[SHFWHG WR JURZ WR  SHUFHQW RI *'3 E\               IDFWRUVPD\VORZ WKHSDFH RISRYHUW\UHGXFWLRQ
 XSIURPSHUFHQWRI*'3LQEHIRUH                      LQFOXGLQJ VORZHU JURZWK LQ WKH DJULFXOWXUDO DQG
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 H[SHQGLWXUHVWUHQJWKHQLQJUHYHQXHPRELOL]DWLRQ
 DQG FDUHIXOO\ PDQDJLQJ H[WHUQDO EDODQFHV DUH
                                                                        B. Several global risks could impact growth
 NH\ WR SUHYHQWLQJ GHEW VXVWDLQDELOLW\ FRQFHUQV
 DQGHQVXULQJWKDW$UPHQLDUHPDLQVUHVLOLHQWLQD
                                                                       On the downside, heightened geopolitical
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                                                                       trading partners.
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 to deteriorate further. 7KH H[WHUQDO GH¿FLW LV
                                                                       23.      Increasing          geopolitical          tensions,
 SURMHFWHGWRZLGHQWRSHUFHQWRI*'3LQ
                                                                       combined           with      increased           uncertainty
 XSIURPSHUFHQWLQDQGWKHQPRGHUDWHWR
                                                                       surrounding economic policies, particularly
 DURXQGSHUFHQWRI*'3LQ'HWHULRUDWLRQ
                                                                       LQWUDGHDQGWKH¿QDQFLDOVHFWRUFRXOGIXUWKHU
 LQ H[WHUQDO EDODQFHV LQ  ZLOO EH GULYHQ
                                                                       hinder growth among key trading partners,
 SULPDULO\E\WKHSRVLWLYHLPSDFWRIUHH[SRUWVDQG

 $UPHQLD¶VWD[UHIRUPVDGYDQFHGLQVWDJHVDQGLQFOXGHG7D[&RGHDPHQGPHQWVHIIHFWHGLQ-DQXDU\VKLIWLQJVRPH
 SURIHVVLRQDOEXVLQHVVHVIURPWKHPRUHDGYDQWDJHRXVWXUQRYHUWD[UHJLPHWRWKHVWDQGDUGWD[UHJLPHGRXEOLQJWD[UDWHVIRUFDVLQRVDQG
 ERRNPDNHUVZLWKKLJKHUOLFHQVLQJIHHVDQGDSHUFHQWWXUQRYHUWD[LPSRVHGRQRQOLQHJDPEOLQJ,QDGGLWLRQSURSHUW\WD[JUDGXDOO\
 UDLVHGRYHU±ZLOOLQFUHDVHORFDOEXGJHWUHYHQXH



20
                                         ARMENIA’S ECONOMIC PULSE


thus affecting Armenia. ,Q WKH PHGLXP WHUP           transition to a higher level of development.
DOWKRXJKWKHGLUHFWLPSDFWRQ$UPHQLDIURPVKLIWV         'HVSLWH QRWDEOH LQFUHDVHV LQ *'3 SHU FDSLWD LQ
LQ WUDGH SROLF\ PLJKW EH OLPLWHG WKH VORZGRZQ     UHFHQW \HDUV DQG SURJUHVV LQ PDFURHFRQRPLF
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IULFWLRQV FRXOG DOVR JHQHUDWH KLJKHU LQÀDWLRQDU\     LQWHUFRQQHFWHG  OLPLWHG FRPSHWLWLRQ UHVWULFWV
SUHVVXUHV WKDQ DQWLFLSDWHG 0RUHRYHU SROLF\          LQQRYDWLRQ DQG HI¿FLHQF\ ORZ LQYHVWPHQW LQ
VKLIWVFRXOGOHDGWRUHGXFHGSULYDWHFRQVXPSWLRQ          VNLOOV DQG WHFKQRORJ\ FXUEV WKH FDSDFLW\ RI
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$UPHQLDDOVRIDFHVGRZQVLGHULVNVIURPHOHFWLRQ           DQGLPSURYHKXPDQFDSLWDOEXWLQVWLWXWLRQDODQG
UHODWHG XQFHUWDLQW\ LQ WKH OHDGXS WR WKH -XQH     LPSOHPHQWDWLRQ FDSDFLW\ FRQVWUDLQWV FRQWLQXH WR
HOHFWLRQVDVZHOODVSRWHQWLDOO\XQUHVROYHG         KLQGHU SURJUHVV $GGUHVVLQJ WKHVH ERWWOHQHFNV
ERUGHUUHODWLRQVZLWKWZRRILWVQHLJKERUV               LVFULWLFDOIRU$UPHQLDWRWUDQVLWLRQWRZDUGDPRUH
                                                           LQFOXVLYHLQQRYDWLRQGULYHQJURZWKPRGHO
An upside is the potential normalization of
relations with neighbors.                                  7KH IROORZLQJ VHFWLRQ ZLOO IRFXV RQ RQH PDMRU
                                                           FURVVFXWWLQJ   FRQVWUDLQWFRPSHWLWLRQ     ,W   ZLOO
24. On the positive side and in the long term,             H[DPLQHKRZOLPLWHGFRQWHVWDELOLW\LQNH\VHFWRUV
ongoing efforts to normalize relations with                SDUWLFXODUO\LQZKROHVDOHDQGUHWDLOLVKROGLQJEDFN
neighboring countries, alongside progress in               SURGXFWLYLW\ EXVLQHVV RSSRUWXQLWLHV LQYHVWPHQW
the EU accession process, could contribute to              DQGFRQVXPHUZHOIDUH
VWURQJHUHFRQRPLFJURZWKDQGGLYHUVL¿FDWLRQ
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to defuse security concerns.



 C. Pending structural challenges constrain
                   future growth


25. Beyond any future risks to this outlook,
Armenia’s growth potential is constrained by
structural challenges that limit private sector
dynamism and hinder the country’s ability to


                                                                                                                21
                                                                                   FAIRER MARKETS FOR INCLUSIVE GROWTH




  A preview of the issues analyzed in the forthcoming Armenia Country Growth and Jobs Report

 Box 2: Structural challenges to Armenia’s growth and job outcomes over past decades
    :HDNPDUNHWFRPSHWLWLRQFXUEVHI¿FLHQF\LQQRYDWLRQDQGLQYHVWPHQW
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    SUDFWLFHVDQGSROLF\JDSVDVFDXVLQJRSHUDWLRQDOULVNV)LJXUH%
Figure B2-1: Compared with peer countries, operational risks linked to a weak competition
environment are higher in Armenia
 Highest risk = 4 for each topic                                                      Score (0-16)
     16
                                                                                                   Vested Interests/Cronyism (0-4)                                                                 Discrimination Against Foreign Companies (0-4)
                                                                                                   Price Controls (0-4)                                                                            Unfair Competitive Practice (0-4)
     11




     6




     1
           Turkmenistan

                          Uzbekistan

                                       Ukraine

                                                 Azerbaijan

                                                              Kyrgyz Republic
                                                                                  Bisnia and
                                                                                Herzegovina
                                                                                               Armenia

                                                                                                         Montenegro

                                                                                                                      Romania

                                                                                                                                Bulgaria

                                                                                                                                           Italy

                                                                                                                                                   Serbia

                                                                                                                                                            Cyprus

                                                                                                                                                                     Georgia

                                                                                                                                                                               Portugal

                                                                                                                                                                                          Turkey

                                                                                                                                                                                                   Poland

                                                                                                                                                                                                            Iceland

                                                                                                                                                                                                                      Malta

                                                                                                                                                                                                                              Denmark

                                                                                                                                                                                                                                        Germany

                                                                                                                                                                                                                                                  Jersey

                                                                                                                                                                                                                                                           Norway

                                                                                                                                                                                                                                                                    Ireland

                                                                                                                                                                                                                                                                              Netherlands

                                                                                                                                                                                                                                                                                            Switzerland

                                                                                                                                                                                                                                                                                                          Finland
Source: Economic Intelligence Unit, Risk Tracker (2023)


          Low levels of private investment hinder capital deepening.
          *URVVFDSLWDOIRUPDWLRQLQ$UPHQLDKDVEHHQUHODWLYHO\ÀDWIRURYHUDGHFDGHZHOOEHORZWKHSHUFHQW
          RI*'3OHYHOVVHHQDPRQJIDVWJURZLQJSHHUFRXQWULHV$OWKRXJKGRPHVWLFVDYLQJVKDYHUHFHQWO\ULVHQ
          WRSHUFHQWRI*'3WKH\UHPDLQEHORZWKHUHJLRQDODYHUDJHRISHUFHQW1HW)',LQÀRZVKDYHDOVR
          ZHDNHQHGVLJQL¿FDQWO\IURPDQDYHUDJHRISHUFHQWRI*'3LQ±WRSHUFHQWRI*'3LQ
          ±GHFOLQLQJIXUWKHUWRSHUFHQWRI*'3LQDQGUHDFKLQJDKLVWRULFDOORZRISHUFHQWLQ
          EHIRUHDPRGHVWUHERXQGWRSHUFHQWRIDQQXDO*'3LQWKH+7KLVGHFOLQHUHÀHFWVHURGHG
          LQYHVWRUFRQ¿GHQFHGXHWRIUHTXHQWSROLF\VKLIWVDQGWKHHIIHFWVRIJHRSROLWLFDOWHQVLRQV

          6KRUWDJHVRIVNLOOHGODERUOLPLWKLJKSURGXFWLYLW\JURZWK.
          (PSOR\HUV FRQVLVWHQWO\ UHSRUW GLI¿FXOW\ LQ ¿QGLQJ VNLOOHG ZRUNHUV *OREDOO\ $UPHQLD UDQNV QHDU WKH
          ERWWRPDVUHJDUGVWKHTXDOLW\RIKLJKHUHGXFDWLRQUHODWLYHWREDVLFHGXFDWLRQ7KLVPLVPDWFKFRQVWUDLQV
          MRE SODFHPHQW DQG ZHDNHQV OLQNV EHWZHHQ XQLYHUVLWLHV DQG SULYDWH VHFWRU GHPDQG$V DQ LOOXVWUDWLRQ
          WKHH[SDQVLRQRI,&7HPSOR\PHQWLQ±FRQWULEXWHGSRVLWLYHO\WRSURGXFWLYLW\EXWLQRWKHUKLJK
          SURGXFWLYLW\VHFWRUVVXFKDV¿QDQFLDOVHUYLFHVFRLQFLGHGZLWKGHFOLQLQJHPSOR\PHQW

          6XEGXHG FRPSDQ\ SURGXFWLYLW\ UHÀHFWV VHYHUH PLVDOORFDWLRQ of resources to less productive
          enterprises.
          (QWHUSULVHOHYHOHYLGHQFHVKRZVWKDWUHVRXUFHVDUHUHDOORFDWHGIURPPRUHSURGXFWLYHWROHVVSURGXFWLYH
          HQWHUSULVHVDFURVVDOOVHFWRUVGUDJJLQJGRZQDJJUHJDWHSURGXFWLYLW\JURZWK(YHQLQ\HDUVRISRVLWLYH
          SURGXFWLYLW\JURZWKLQWHUFRPSDQ\G\QDPLFVKDYHKDGDQHJDWLYHHIIHFWKLJKOLJKWLQJDVWUXFWXUDOFKDOOHQJH
          WKDW VXSSUHVVHV SULYDWH VHFWRU FRPSHWLWLYHQHVV DQG KDPSHUV $UPHQLD¶V SRWHQWLDO IRU LQFOXVLYH DQG
          VXVWDLQHGJURZWK

          Source: Armenia Country Growth and Jobs Report (forthcoming)




22
         PART II
           SPECIAL TOPIC
PROMOTING COMPETITION IN ARMENIA
 FOR FASTER, MORE INCLUSIVE, AND
    PRODUCTIVITY-LED GROWTH
                             FAIRER MARKETS FOR INCLUSIVE GROWTH



         2. SPECIAL TOPIC: PROMOTING COMPETITION IN
          ARMENIA FOR FASTER, MORE INCLUSIVE, AND
                  PRODUCTIVITY-LED GROWTH


       2.1 Why is it important to assess                   UDLVHV RYHUDOO SURGXFWLYLW\ DQG VSXUV JURZWK
           competition in Armenia?                         &RPSHWLWLRQRSHUDWHVWKURXJKWKUHHNH\FKDQQHOV
                                                           LQFHQWLYL]LQJ HQWHUSULVHV WR ERRVW LQWHUQDO
 26.    Competition     is    a    powerful       engine   HI¿FLHQF\ ZLWKLQHIIHFW UHDOORFDWLQJ UHVRXUFHV
 of    economic     growth,       fostering   a    more    WRZDUGPRUHSURGXFWLYHDFWRUVEHWZHHQHIIHFW
 HI¿FLHQW DOORFDWLRQ RI UHVRXUFHV ZKLOH               DQG HQDEOLQJ PDUNHW VHOHFWLRQ WKDW IDYRUV KLJK
 driving enterprises to innovate and improve               SHUIRUPHUV VHOHFWLRQFRPSRQHQW $FHPRJOX
 productivity. ,Q ZHOO ² IXQFWLRQLQJ PDUNHWV        HW DO  $JKLRQ DQG *ULI¿WK  %ORRP
 FRPSHWLWLRQ UHZDUGV HQWHUSULVHV WKDW SHUIRUP          'UDFDDQG9RQ5HHQHQ$JKLRQHWDO
 EHVW ² LQQRYDWLQJ XSJUDGLQJ SURFHVVHV              6\YHUVRQ  DQG (VODYD HW DO  %R[ 
 DQG SXVKLQJ SURGXFWLRQ ERXQGDULHV ² ZKLOH           VXPPDUL]HV VHOHFWHG HPSLULFDO HYLGHQFH RQ WKH
 DOORZLQJ OHVV HI¿FLHQW HQWHUSULVHV WR H[LW 7KLV   EHQH¿WVRIFRPSHWLWLRQ




 %R[  &RPSHWLWLRQ LQ PDUNHWV LV WUDQVIRUPDWLYH HVSHFLDOO\ IRU PLFUR VPDOO DQG PHGLXP
 enterprises (MSMEs).

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         EURDGHUHFRQRPLFWUDQVIRUPDWLRQ'DXGD

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24
                                                  ARMENIA’S ECONOMIC PULSE


27. There have been notable improvements                                   UHYHDOVWKDWRYHUWKH±SHULRGHQWHUSULVH
in    Armenia’s         competition          landscape          in         SURGXFWLYLW\ KDV EHHQ GULYHQ E\ ZLWKLQ¿UP
recent years.  2YHU WKH ODVW GHFDGH D VHULHV                      LPSURYHPHQWVDQGWKDWEHWZHHQ¿UPUHDOORFDWLRQ
RIUHIRUPVKDVDOLJQHG$UPHQLD¶VDQWLWUXVWVWDWH                         KDVQRWFRQWULEXWHGWRSURGXFWLYLW\JURZWK7KLVLV
DLGFRQWURODQGFRQVXPHUSURWHFWLRQIUDPHZRUNV                            EHFDXVH D KHDOWK\ FRPSHWLWLYH PDUNHW LQYROYHV
ZLWK LQWHUQDWLRQDO SUDFWLFH )RU H[DPSOH WKH                        HQWHUSULVHV FRQVWDQWO\ UHDOORFDWLQJ UHVRXUFHV
DPHQGPHQWVWRWKHFRPSHWLWLRQIUDPHZRUN                              ² ZLWK OHVV SURGXFWLYH HQWHUSULVHV H[LWLQJ WKH
VWUHQJWKHQHG         LQVSHFWLRQ       DQG     LQYHVWLJDWLYH            PDUNHWDQGPRUHSURGXFWLYHHQWHUSULVHVHQWHULQJ
SRZHUV DQG UHYLVHG WKH SHQDOWLHV UHJLPH                            JURZLQJ LQQRYDWLQJ DQG GULYLQJ HI¿FLHQF\ 7KLV
IDFLOLWDWLQJ HQIRUFHPHQW 7KH &RPSHWLWLRQ DQG                         6SHFLDO 7RSLF RQ FRPSHWLWLRQ GLVFXVVHV VRPH
&RQVXPHU 3URWHFWLRQ &RPPLVVLRQ &&3& KDV                             RI WKH FRQVWUDLQWV WR FRPSHWLWLRQ WKDW PD\ EH
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LWV PDQGDWH H[SDQGHG LPSURYLQJ LWV LQWHUQDO                         with a focus on the wholesale and retail sector
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YLVLELOLW\DQGH[SDQGLQJHQIRUFHPHQWDFWLYLWLHV               
                                                                           HPSOR\PHQWLQ$UPHQLD
0RVW UHFHQWO\ LQ $XJXVW  D FRQVROLGDWHG
FRQVXPHUSURWHFWLRQIUDPHZRUNZDVHVWDEOLVKHG                             The competition landscape: concentration
LQ OLQH ZLWK WKH $UPHQLD±(8 &RPSUHKHQVLYH                            in Armenia is higher than in peer countries,
DQG (QKDQFHG 3DUWQHUVKLS $JUHHPHQW &(3$                            although          recent        years         show         slight
JUDQWLQJ&&3&VWURQJHUFRPSOHPHQWDU\WRROVWR                             improvements. Entrenchment has room to be
GLVFRXUDJH XQIDLU WUDGLQJ SUDFWLFHV DQG VXSSRUW                      lowered.
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                                                                           29.        Overall,          Armenia’s            competitive
28. Despite this progress, there are indications                           environment             is      marked          by       higher
that there is room to improve contestability                               concentration and lower productivity than
and market operations in the allocation of                                 in peer countries.13 Across the sectors where
resources to the most productive enterprises                               GRPHVWLF SURGXFWLRQ DQG FRQVXPSWLRQ JHQHUDOO\
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ZLUHOHVVDQGZLUHOHVVFRPPXQLFDWLRQVH[FHSWVRIWZDUHSXEOLVKLQJ¿QDQFHDQGLQVXUDQFHH[FHSWFHQWUDOEDQNLQJDQGSHQVLRQIXQGLQJ          
ZKLFKDUHH[FOXGHGJLYHQWKHLUW\SHRIHFRQRPLFDFWLYLW\UHDOHVWDWHSURIHVVLRQDOVFLHQWL¿FDQGWHFKQLFDODGPLQLVWUDWLYHDQGVXSSRUW
VHUYLFHV7KHVHVXEVHFWRUVDUHSUHGRPLQDQWO\GHVWLQHGIRUORFDOFRQVXPSWLRQZKLOHH[SRUWVDUHSUHVHQWLQDIHZRIWKHPDQXIDFWXULQJ
VXEVHFWRUVOLVWHGDVSHULQIRUPDWLRQIURP&2075$'(WKHVHDUHPLQLPDO7KHIROORZLQJVHFWRUVDUHH[FOXGHGIURPWKHDQDO\VLVEHLQJ
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                                                                                                                                           25
                                    FAIRER MARKETS FOR INCLUSIVE GROWTH


 structural peer countries for which data is                                     30.      Several          of      Armenia’s            economic
 DYDLODEOH QDPHO\ *HRUJLD DQG 0ROGRYD DQG                                sectors exhibit greater concentration and
 RQH DVSLUDWLRQDO SHHU &URDWLD )LJXUH D                              entrenchment compared with peer countries,
 DOWKRXJK FRQFHQWUDWLRQ KDV UHGXFHG VOLJKWO\                                often correlating with lower labor productivity.
 LQ WKH IROORZLQJ \HDUV )LJXUH E 0HGLDQ                              $QDO\]HG DW DQ DJJUHJDWHG OHYHO $UPHQLDQ
 HQWUHQFKPHQW  DPRQJ WKH WRS IRXU HQWHUSULVHV
                      
                                                                                 ZKROHVDOH DQG UHWDLO VHFWRUV FRPPHUFH
 VWDQGV DW  SHUFHQW ZKLFK PHDQV WKDW WKH                              KDYH OHYHOV RI FRQFHQWUDWLRQ )LJXUH  DQG
 probability of one of the top four enterprises                                  HQWUHQFKPHQW)LJXUHVLPLODUWRLWVVWUXFWXUDO
 UHPDLQLQJ LQ WKH PDUNHW DIWHU WKUHH \HDUV LV                         SHHUV !  SHUFHQW EXW LWV SURGXFWLYLW\ OHYHO
 SHUFHQWVXJJHVWLQJPHGLXPWXUQRYHUDWWKHWRS                                LV ZHOO EHORZ WKHVH SHHUV ,W LV ZRUWK QRWLQJ
 7KLV LV ORZHU WKDQ LQ &URDWLD DQG 0ROGRYD EXW                         WKDW FRQFHQWUDWLRQ FDQ EH OLQNHG WR $UPHQLD¶V
 VWLOOKLJKHUWKDQLQ*HRUJLD)LJXUH$OWKRXJK                             OLPLWHG PDUNHW VL]H KRZHYHU LI PDUNHWV ZHUH
 PDUNHW FRQFHQWUDWLRQ DQG HQWUHQFKPHQW GR QRW                              FRQWHVWDEOHHQWHUSULVHVZRXOGKDYHLQFHQWLYHVWR
 DOZD\V KLQGHU JURZWK  HVSHFLDOO\ ZKHQ GULYHQ                            EHFRPHPRUHSURGXFWLYHHYHQLQVPDOOPDUNHWV
 E\LQQRYDWLRQDQGHI¿FLHQF\LQ$UPHQLDKLJKHU                               )XUWKHU LQ $UPHQLD ODERU SURGXFWLYLW\ DFURVV
 FRQFHQWUDWLRQ LV QRW \LHOGLQJ SURGXFWLYLW\ JDLQV                         all sectors is consistently lower than in peer
 FRPSDUHG ZLWK LWV SHHUV 'XULQJ  WKH                             FRXQWULHV)LJXUH7KHQH[WVHFWLRQH[SORUHV
 RQO\SHULRGZLWKFRPSDUDEOHGDWDIRUDOOFRXQWULHV                             WKHG\QDPLFVRIWKHZKROHVDOHDQGUHWDLOVHFWRU
 LQ WKLV DQDO\VLV $UPHQLD¶V PHGLDQ SURGXFWLYLW\
 OHYHOVUHPDLQHGVLJQL¿FDQWO\EHORZSHHUV)LJXUH
 D0RUHRYHU$UPHQLD¶VODERUSURGXFWLYLW\KDV
 VKRZQ RQO\ PDUJLQDO LPSURYHPHQWV RYHU WLPH
 )LJXUHE


Figure 18a: Armenia's revenue                       Figure 18b: Concentration levels in                  Figure 19: Median entrenchment
share of top 4 firms is higher than                 non-tradable sectors within Arme-                    stands at 58% lower than Moldova
peer countries in non-tradable                      nia have declined slightly over the                  and Croatia but higher than in
sectors of the economy (2018-2019                   2018-2023 period (average reve-                      Georgia
average)                                            nue share of top 4 firms)
          Revenue share of top 4 firms               Revenue share of top 4 firms in non-tradable            Entrenchment among top 4 companies
                                                                       sectors
100%                                                100%                                                 100%

 80%                                                  80%        73%                                      80%
                                                                             74%         68%

 60%                                                  60%                                                 60%

 40%                                                  40%                                                 40%

 20%                                                  20%                                                 20%

     0%                                                0%                                                   0%

            Armenia            Croatia                         2018-2019           2020-2021                            Armenia (2018-2023)
                                                                                                                        Georgia (2015-2019)
            Georgia            Moldova                         2022-2023
                                                                                                                        Croatia (2015-2019)
                                                                                                                        Moldova (2015-2019)




  (QWUHQFKPHQW PHDVXUHV WKH SUREDELOLW\ RI DQ LQGXVWU\¶V WRS IRXU HQWHUSULVHV LQ \HDU W KROGLQJ WKDW SRVLWLRQ LQ \HDU W +LJKHU
 HQWUHQFKPHQWOHYHOVLPSO\OHVVEXVLQHVVG\QDPLVPDWWKHWRS*LYHQGDWDDYDLODELOLW\JDSVYDOXHVIRU$UPHQLDDUHIRUWKH²
 SHULRGZKLOHWKHYDOXHVIRU&URDWLD*HRUJLDDQG0ROGRYDDUHIRUWKH²SHULRG



26
                                                                                                                    ARMENIA’S ECONOMIC PULSE



Figure 20a: Labor productivity at the                                                                                                                                   Figure 20b: … while labor productivity levels have
economy-wide level is below those of peer                                                                                                                               improved slightly over the 2018-2023 period
countries (2018-2019 average log revenue per                                                                                                                            (average log revenue per worker)
worker)...
                            Log value added per worker                                                                                                                                                         Log value added per worker
  14                                                                                                                                                                          12

  12                                                                                                                                                                          10

                                                                                                                                                                                                                        8                                                8.1                                                 8.2
  10                                                                                                                                                                           8

   8                                                                                                                                                                           6

   6                                                                                                                                                                           4

   4                                                                                                                                                                           2

                                          Armenia                                            Croatia                                                                                                                                     2018-2019                                               2020-2021
                                          Georgia                                            Moldova                                                                                                                                     2022-2023

Source: World Bank, based on company-level datasets from the State Revenue Committee
Note: The revenue share of the top four enterprises includes enterprises in non-tradable sectors, as defined in footnote 14. The horizontal
lines and the x symbols within the boxplot represent the median and the mean values of the data, respectively. The boxes depict the
distribution of each variable for each country. The lower and upper bounds of the box correspond to the 25th (Q1) and 75th (Q3) percen-
tiles.



Figure 21: In most sectors, concentration is                                                                                                                           Figure 22: In about half of the sectors,
higher than in peer countries                                                                                                                                          entrenchment is higher than in peer countries
Concentration - revenue share of top 4 enterprises                                                                                                                     Entrenchment among top 4 enterprises by economic
(five-year average)                                                                                                                                                    activity (five-year average)
                                                                                                                                                                       80%
100%                                                                                                                                                                   70%
                                                                                                                                                                       60%
 90%
                                                                                                                                                                       50%
 80%                                                                                                                                                                   40%
 70%                                                                                                                                                                   30%
                                                                                                                                                                       20%
 60%                                                                                                                                                                   10%
 50%                                                                                                                                                                    0%
                                                                                                                                                                                   Energy

                                                                                                                                                                                             Mining
                                                                                                                                                                                                        Manufacturing

                                                                                                                                                                                                                          Water supply
                                                                                                                                                                                                                                           Transport

                                                                                                                                                                                                                                                          Haspitality

                                                                                                                                                                                                                                                                        Arts

                                                                                                                                                                                                                                                                                Commerce
                                                                                                                                                                                                                                                                                             ICT
                                                                                                                                                                                                                                                                                                             Admin/support

                                                                                                                                                                                                                                                                                                                              Construction

                                                                                                                                                                                                                                                                                                                                               Professional

                                                                                                                                                                                                                                                                                                                                                                Real estate
 40%

 30%

 20%

 10%
                                                                                                                                                                       Figure 23: Labor productivity is low across all
  0%                                                                                                                                                                   sectors
        Enegry
                 Water supply
                                Mining

                                         Transport

                                                     Manufacturing
                                                                     Arts

                                                                            ICT
                                                                                  Admin/support

                                                                                                  Hospitality

                                                                                                                Construction
                                                                                                                               Commerce
                                                                                                                                          Professional

                                                                                                                                                         Real estate




                                                                                                                                                                       Labor productivity levels (five-year average)

                                                                                                                                                                       10.0
                                                                                                                                                                        8.0
                                                                                                                                                                        6.0
                                         Armenia (2018-2023 avg.)                                                                                                       4.0
                                         Structural (2015-2019 avg.)                                                                                                    2.0
                                                                                                                                                                        0.0
                                                                                                                                                                               Energy

                                                                                                                                                                                            Mining
                                                                                                                                                                                                      Construction

                                                                                                                                                                                                                        Transport

                                                                                                                                                                                                                                         Professional
                                                                                                                                                                                                                                                        Manufacturing

                                                                                                                                                                                                                                                                        ICT
                                                                                                                                                                                                                                                                               Commerce

                                                                                                                                                                                                                                                                                           Admin/support

                                                                                                                                                                                                                                                                                                           Hospitality
                                                                                                                                                                                                                                                                                                                             Arts

                                                                                                                                                                                                                                                                                                                                             Water supply
                                                                                                                                                                                                                                                                                                                                                              Real Estate




Source: World Bank, based on enterprise-level datasets from the
State Revenue Committee




                                                                                                                                                                                                                                 Armenia (2018-2023 avg.)
                                                                                                                                                                                                                                 Structural (2015-2019 avg.)
                                                                                                                                                                       Source: World Bank, based on company-level datasets from the
                                                                                                                                                                       State Revenue Committee




                                                                                                                                                                                                                                                                                                                                                                              27
                                  FAIRER MARKETS FOR INCLUSIVE GROWTH


 1RWH7KHUHYHQXHVKDUHRIWKHWRSIRXUHQWHUSULVHVLQFOXGHVHQWHUSULVHVLQQRQWUDGDEOHVHFWRUVDVGH¿QHGLQIRRWQRWH
 14; it excludes natural monopoly industries. For entrenchment rates, some industries had similar rates when selecting the
 top 25 highly entrenched industries. Ties among the top 25 were broken by level of concentration; those highly concentrated
 are shown. ‘Arts’ includes gambling.

 Note 2: Since the reference period for Armenia (2018–2023) differs from that used for comparator countries (2015–2019)—
 and notably includes major economic shocks such as the COVID-19 pandemic—a robustness check was conducted.
 6SHFL¿FDOO\DQQXDODYHUDJHVRIWKHUHYHQXHVKDUHRIWKHWRSIRXU¿UPVDQGRIORJYDOXHDGGHGSHUZRUNHUZHUHUHFDOFXODWHG
 for Armenia and peer countries using only the 2018–2019 period, where the data overlap. The results remain fully consistent
 (See Annex 2).




      2.2 Spotlight on the wholesale and                                     Figure 24: Wholesale and retail trade drove
                                                                             growth
     retail sector - are there symptoms of
                                                                             Sector contribution to GDP growth, 2017–2024
              competition issues?                                            (percentage point)
                                                                              1.2
                                                                              1.0
 The wholesale and retail trade sector is critical
                                                                              0.8
 for inclusive growth and job creation                                        0.6
                                                                              0.4
                                                                              0.2
 31. The wholesale and retail sector is                                       0.0
 critical to the Armenian economy. It is a key
                                                                                                                      Mining
                                                                                                             Manufacturing
                                                                                                             Electricity, gas
                                                                                                   Water supply, sewerage
                                                                                                               Construction
                                                                                                   Trade (Wholesale&retail)
                                                                                                                  Transport
                                                                                                             Accomodation
                                                                                                                          ICT
                                                                                                                   Financial
                                                                                                                Real estate
                                                                                                     Professional, Scientific
                                                                                                        Admin and support
                                                                                                      Public administration
                                                                                                                Eduacation
                                                                                                                      Health
                                                                                                                         Arts
                                                                                                              Other service
                                                                             -0.2
 contributor to growth, provides economic                                    -0.4
                                                                                     Agriculture




                                                                             -0.6
 opportunities for MSMEs as suppliers, and
 has extensive links to many segments of the
 population.2YHUWKHODVWIHZ\HDUV
 the wholesale and retail sector has contributed
                                                                             Source: Armstat
 DOPRVWSHUFHQWWRWRWDOJURZWK)LJXUH7KH
 VHFWRU LV DOVR GHHSO\ LQWHUFRQQHFWHG DIIHFWLQJ
 LQGLYLGXDOV ERWK DV FRQVXPHUV KRXVHKROGV
                                                                              Figure 25: Wholesale and retail trade has a
 DQG DV HPSOR\HUVHPSOR\HHV HQWHUSULVHV DV                              large employment share
 VXSSOLHUV $ ZLGH VSHFWUXP RI UHWDLOHUV VHOO                         Sector share of employment (2018–2023)
 SURGXFWV ± IURP SKDUPDFHXWLFDOV WR DSSDUHO
                                                                              20.0
 DQG YHKLFOHV ± WKDW DFFRXQW IRU RYHU  SHUFHQW
                                                                              15.0
 RI WKH FRQVXPSWLRQ EDVNHW $ERXW  SHUFHQW
 RI WKH DYHUDJH KRXVHKROG FRQVXPSWLRQ EDVNHW                            10.0

 is allocated to food products and non-alcoholic                               5.0
 EHYHUDJHV ZLWK D KLJKHU VKDUH DPRQJ SRRUHU
                                                                               0.0
 households.
                                                                                                     Agriculture
                                                                                                           Mining
                                                                                                  Manufacturing
                                                                                                  Electricity, gas
                                                                                        Water supply, sewerage
                                                                                                    Construction
                                                                                        Trade (Wholesale&retail)
                                                                                                       Transport
                                                                                                  Accomodation
                                                                                                               ICT
                                                                                                        Financial
                                                                                                     Real estate
                                                                                          Professional, Scientific
                                                                                             Admin and support
                                                                                           Public administration
                                                                                                     Eduacation
                                                                                                           Health
                                                                                                              Arts
                                                                                                   Other service




 32. The wholesale and retail sector is also
 important for jobs. 7KH VHFWRU¶V VKDUH LQ WKH
 HFRQRP\ KDV EHHQ LQFUHDVLQJ LQ UHFHQW \HDUV
 DQGZDVDSSUR[LPDWHO\SHUFHQWLQ$IWHU                             Source: Armstat




 7KHRWKHUSHUFHQWDUHVHUYLFHVQRWRIIHUHGLQUHWDLOVWRUHVVXFKDVUHQWXWLOLWLHVHQWHUWDLQPHQWHWF




28
                                                                               ARMENIA’S ECONOMIC PULSE


DJULFXOWXUH WKH VHFWRU UHSUHVHQWV WKH VHFRQG                                              EHYHUDJHVLVDQDO\]HGDVDQLQWHJUDWHGFOXVWHU
ODUJHVWVRXUFHRIHPSOR\PHQWSURYLGLQJMREVIRU                                                GXHWRLWVVWURQJLQWHUQDOOLQNDJHVUHWDLOFRQQHFWV
VRPH  SHUFHQW RI WKH ZRUNIRUFH )LJXUH                                             ZKROHVDOH GLVWULEXWLRQ ZLWK ¿QDO FRQVXPHUV
,W LV FULWLFDO WR XQGHUVWDQG KRZ WKH UHJXODWRU\                                          WUDQVSRUW HQDEOHV HI¿FLHQW PRYHPHQW RI JRRGV
HQYLURQPHQW DQG G\QDPLFV GULYH WKH VHFWRU¶V                                                DQG WKH IRRG VHFWRU EULGJHV SURGXFWLRQ DQG
JURZWK                                     VXVWDLQLQJ     EURDGEDVHG         HFRQRPLF      GLVWULEXWLRQ 'HVSLWH WKHVH LQWHUGHSHQGHQFLHV
JURZWKDQGZHOIDUHIRUDVLJQL¿FDQWSRUWLRQRIWKH                                              $UPHQLD¶V VSLOORYHU EDVHOLQH UHPDLQV ORZ DV
population.                                                                                      LOOXVWUDWHGLQ)LJXUHZKHUHWKHFRXQWU\VLWVLQ
                                                                                                 WKH ERWWRPOHIW TXDGUDQW UHODWLYH WR LWV UHJLRQDO
  2.3 The wholesale and retail sector                                                            FRPSDUDWRUV)LJXUHVKRZVWKDWDQLQYHVWPHQW
                                                                                                 LPSXOVH  LQ WKH PDFURVHFWRU \LHOGV D VSLOORYHU
 has strong, economy-wide linkages;
                                                                                                 HIIHFW RI RQO\  LQ$UPHQLD  PDUNHGO\ ORZHU
however, investment spillovers are few,
                                                                                                 WKDQ  LQ &HQWUDO DQG (DVWHUQ (XURSH DQG
 and there are persistent performance
                                                                                                 LQ&HQWUDO$VLD7KLVZLGHJDSVXJJHVWVWKDW
  gaps and limited supplier diversity.                                                           WKHUH LV VXEVWDQWLDO VFRSH WR HQKDQFH OLQNDJHV
                                                                                                 DQG HI¿FLHQFLHV DFURVV LQGXVWULHV ZLWKLQ WKH
33. In Armenia, spillover effects from the                                                       PDFURVHFWRU
combined wholesale, retail, and food logistics
macrosector are below those of regional
peers, indicating untapped economic growth
potential.7KHPDFURVHFWRURPSULVLQJZKROHVDOH
WUDGH UHWDLO WUDGH WUDQVSRUW DQG IRRG DQG



Figure 26: Armenia's spillover baseline remains low                                                         Figure 27: An investment impulse in
Current estimated spillovers from improved sector value added                                               the macrosector yields a lower
                                                                                                            spillover effect than in peer countries
                     100.0M
                                                                                                            Comparative sector spillover impact (2022)
                                                                                          Armenia
 Spillover effects (in log scale)




                                                                                          Azerbaijan
                                    10.0M
                                                                                          Bulgaria
                                                                                          Czech Republic
                                                                                          Hungary
                                     1.0M                                                 Kazakhstan             23.1           21.9
                                              Armenia
                                                                                          Poland
                                                                                          Romania                                             12.5
                                                                                          Tajikistan
                                     0.1M
                                                                                          Turkmenistan
                                                                                          Uzbekistan
                                                                                                                      Central and Eastern Europe
                                    0.0M
                                            0.1M             1.0M              10.0M                                  Central Asia
                                              1% Increase in Value Added (in log scale)                               Armenia
Source: Elaboration using EORA 2022 IO Tables. (Phumpiu Chang and Rahatsen 2025)
Note: The y-axis reflects the magnitude of the spillover effect, approximating the total impact that an initial investment of 1 unit in a sector has
across the rest of the economy. X- axis represents the assumed shock-1 percent increase in the value added. Bubble sizes indicate the sector’s
contribution to total national value added.




7KHVSLOORYHUQXPEHUIRU$UPHQLDPHDVXUHVWKHFXPXODWLYHDGGLWLRQDOHFRQRPLFDFWLYLW\JHQHUDWHGDFURVVDOOVHFWRUVUHVXOWLQJ
IURP DQ LQLWLDO LQYHVWPHQW LPSXOVH RI  PRQHWDU\ XQLWV LQYHVWHG VSHFL¿FDOO\ LQ WKH ZKROHVDOH UHWDLO DQG IRRG ORJLVWLFV PDFURVHFWRU
+LJKHUYDOXHVLQGLFDWHVWURQJHUHFRQRPLFLQWHUFRQQHFWLRQVDQGPRUHHIIHFWLYHLQWHUVHFWRUOLQNDJHV
$QLQYHVWPHQWLPSXOVHUHIHUVWRDVXUJHRUVKLIWLQLQYHVWPHQWZLWKLQDVHFWRUWKDWVHWVRIIEURDGHUHFRQRPLFHIIHFWVWKURXJKVXSSO\
FKDLQDQGGHPDQGOLQNDJHVDPSOLI\LQJLWVLPSDFWDFURVVLQWHUFRQQHFWHGVHFWRUV



                                                                                                                                                      29
                                                                    FAIRER MARKETS FOR INCLUSIVE GROWTH


 34. In recent years, gross operating surplus                                                                                                   DORQJ WKH KRUL]RQWDO D[LV ZKLOH VLPXOWDQHRXVO\
 (GOS) ratios in wholesale and retail trade                                                                                                     PDLQWDLQLQJ RU UHGXFLQJ FRQFHQWUDWLRQ OHYHOV
 have been on the rise. ,Q ± *26                                                                                       
                                                                                                                                                DFURVVOLQNHGVHFWRUVVWDEOHRUGRZQZDUGVKLIWV
 UDWLRVIRUZKROHVDOHDQGUHWDLOWUDGHLQFUHDVHG                                                                                           RQ WKH YHUWLFDO D[LV 6LPLODU FRQFHQWUDWLRQ LV
 SHUFHQWDQGSHUFHQWUHVSHFWLYHO\FRPSDUHG                                                                                               RFFXUULQJGRZQVWUHDPZLWKJURZLQJGHSHQGHQFH
 ZLWK ± LQGLFDWLQJ DQ LQFUHDVH LQ SUR¿W                                                                                         RQ IHZHU EX\LQJ VHFWRUV DQG QR FRUUHVSRQGLQJ
 PDUJLQVDOEHLWDFFRPSDQLHGE\SRWHQWLDOPDUNHW                                                                                               LPSURYHPHQW LQ YDOXH DGGLWLRQ )LJXUH 
 power and distortions.  7KHUHIRUH WKHUH DUH                   20
                                                                                                                                                H[SRVLQJWKHVHFWRUWRUHGXFHGEDUJDLQLQJSRZHU
 VLJQV RI SHUIRUPDQFH JDSV ZKHQ H[DPLQLQJ WKH                                                                                            DQGPDUNHWG\QDPLVP
 VXUSOXV JHQHUDWHG DQG FRQQHFWLYLW\ ZLWK RWKHU
 sectors.                                                                                                                                       36.         A       comparable                                    pattern             of        rising
                                                                                                                                                concentration                                          paired            with              stagnant
 35. Moreover, the wholesale trade sector
                                                                                                                                                productivity hampers long-term sustainability
 is                             faced          with         rising           concentration                                       in
                                                                                                                                                and growth in the food and beverages sector.
 connections with other sectors and stagnant
                                                                                                                                                8QOLNH FRXQWULHV VXFK DV 6HUELD DQG %XOJDULD
 value addition. 8QOLNH SHHU FRXQWULHV VXFK DV
                                                                                                                                                ZKLFKKDYHVXFFHVVIXOO\GLYHUVL¿HGDQGLQQRYDWHG
 6HUELD WKH ZKROHVDOH VHFWRU LV EHFRPLQJ PRUH
                                                                                                                                                E\ PHDQV RI D EURDGHU VXSSOLHU EDVH WKH IRRG
 GHSHQGHQW RQ IHZHU VXSSO\LQJ VHFWRUV ZLWKRXW
                                                                                                                                                VHFWRULQ$UPHQLDUHPDLQVRYHUO\GHSHQGHQWRQD
 DFKLHYLQJ YDOXH DGGLWLRQ JDLQV )LJXUH 
                                                                                                                                                OLPLWHGQXPEHURIVXSSO\LQJVHFWRUV)LJXUH
 SRLQWLQJWRJURZLQJLQHI¿FLHQF\DQGYXOQHUDELOLW\
                                                                                                                                                7KHODFNRIVXSSOLHUGLYHUVLW\LQFUHDVHVH[SRVXUH
 WRVXSSO\VKRFNV,GHDOO\WKHVHFWRUVKRXOGDLPWR
                                                                                                                                                WRYRODWLOLW\LQFRVWVDQGOLPLWVLQQRYDWLRQ
 LQFUHDVHYDOXHDGGHGSHUFDSLWDDVKLIWULJKWZDUG

 Figure 28: Wholesale is becoming                                                      Figure 29: Wholesale also has                                                      Figure 30: Armenia is over-
 more reliant on fewer supplying                                                       fewer buying sectors - Sectoral                                                    dependent     on   fewer     food-
 sectors - Sectoral concentration                                                      concentration      (concentration                                                  supplying sectors - Sectoral
 (concentration based on input-                                                        based on input-output linkages).                                                   concentration      (concentration
 output linkages).                                                                                                                                                        based on input-output linkages).
                                 Wholesale trade - upstream                                                           Wholesale trade - downstream                                                      Food and beverages - upstream
                               0.30                                                                                  0.20                                                                              0.20
                                                   2018-2022
                                                                                                                                                                                                                         2018-2022
                                                                                                                                         2018-2022
  HHI Upstream Concentration




                               0.25
                                                                                        HHI Upstream Concentration




                                                                                                                                                                          HHI Upstream Concentration




                                                                                                                                                                                                                               2013-2017
                                                          2013-2017                                                  0.15                   2013-2017
                                                                                                                                                                                                       0.15
                                                                                                                                         2008-2012
                                                                                                                                                                                                                      2008-2012
                               0.20                     2008-2012

                                           2003-2007
                                                                                                                                                                                                                  2003-2007
                                                                                                                     0.10                                                                              0.10
                               0.15
                                                                                                                               2003-2007

                               0.10
                                  0.01          0.10           1.00         10.0                                     0.05                                                                              0.05
                                                                                                                        0.01           0.10          1.00         10.0                                    0.01          0.10           1.00         10.0
                                      Average Value Added per capita (log scale)
                                                                                                                            Average Value Added per capita (log scale)                                        Average Value Added per capita (log scale)

                                                                                   Armenia                                  Bulgaria                 Serbia              Poland
 Source: Elaboration based on EORA Input-Output tables (Phumpiu Chang and Rahatsen 2025)
 Note: The horizontal axis measures average value added per capita (log scale), reflecting sector value addition and efficiency. Movement to the right indicates gains
 in innovation, resource allocation, and/or capital investment. The Herfindahl-Hirschman Index (HHI) formula is calculated to proxy concentration. The vertical axis
 measures sector concentration using the index which is computed from EORA input–output tables as the sum of squared input or output shares across sectors. This
 index captures the concentration of a sector’s supply (upstream) or sales (downstream) structure—that is, its dependence on a limited number of supplier or buyer
 industries—rather than market concentration among individual firms. Higher concentration values indicate greater dependence on fewer sectors. Upstream
 concentration signals supply risks; downstream, less flexibility. Arrows show value added/concentration trends across Armenia and peer countries.



 *26UDWLRV±±FDOFXODWHGDVWKHGLIIHUHQFHEHWZHHQWRWDORXWSXWDQGWKHVXPRILQWHUPHGLDWHFRQVXPSWLRQHPSOR\HHFRPSHQVDWLRQDQG
 QHWSURGXFWLRQWD[HVH[SUHVVHGDVSHUFHQWDJHVRIVHFWRURXWSXW±±SURYLGHHVVHQWLDOLQVLJKWVLQWRVHFWRUSUR¿WDELOLW\OLQNHGWRFRPSHWLWLYH
 FRQGLWLRQVDPRQJRWKHUIDFWRUV
 1RWHWKDWRWKHUIDFWRUVPD\EHDWSOD\VXFKDVIDVWHUJURZWKDQGVWURQJHUGRPHVWLFGHPDQGLQWKHSRVW&29,'SDQGHPLFSHULRG
 until 2022.



30
                                                                                                                                                 ARMENIA’S ECONOMIC PULSE



   2.4 Market structure dynamics and                                                                                                                                                                        i) The food retail sector stands out as having
  outcomes vary across subsectors of                                                                                                                                                                        greater                            concentration                                                                  and                                                  entrenchment

   ZKROHVDOHDQGUHWDLOZLWKUHGÀDJV                                                                                                                                                                     than peer countries, and the lowest labor
                                                                                                                                                                                                            productivity.
         emerging in food retail
                                                                                                                                                                                                            38. In Armenia, both the food wholesale
37. A distinguishing feature of Armenia’s
                                                                                                                                                                                                            and the food retail sectors have higher
food retail sector is its greater concentration
                                                                                                                                                                                                            concentration levels and lower productivity
and entrenchment of large players than its
                                                                                                                                                                                                            than peer countries. )LUPOHYHO DQDO\VLV ¿QGV
peer economies, along with persistently low
                                                                                                                                                                                                            that retail sales by the top four enterprises in
labor productivity. *HRJUDSKLF GRPLQDQFH E\
                                                                                                                                                                                                            QRQVSHFLDOL]HG IRRG VWRUHV KDYH FRQFHQWUDWLRQ
a handful of wholesalers and retailers further
                                                                                                                                                                                                            OHYHOVRISHUFHQWRIWRWDOVDOHVDQGLQIRRG
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                                                                                                                                                                                                            RI WRWDO VDOHV )LJXUH   FRPSDUHG ZLWK 
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                                                                                                                                                                                                            SHUFHQW DQG  SHUFHQW UHVSHFWLYHO\ IRU
reductions in selected food products are not
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retail sector.


Figure 31: Retail in non-specialized food stores                                                                                                                                                            Figure 32: While food wholesale shows lower
and food wholesale shows relatively moderate                                                                                                                                                                entrenchment      than    peers,      retail   in
concentration    among     trade    sub-sectors,                                                                                                                                                            non-specialized food stores is highly entrenched
however higher compared to peers                                                                                                                                                                            and more than peers
Concentration (top 4 enterprises per industry) of the wholesale                                                                                                                                             Entrenchment (top 4 enterprises per industry) of the wholesale
  and retail trade sector in Armenia ( five-year average, %)                                                                                                                                                  and retail trade sector in Armenia ( five-year average, %)

100                          Armenia                                                        Structural (2015-19 avg)                                                                                        100                                                  Armenia                                                  Structural (2015-19 avg)

  80                                                                                                                                                                                                         80

  60                                                                                                                                                                                                         60

  40                                                                                                                                                                                                         40

  20                                                                                                                                                                                                         20

   0                                                                                                                                                                                                          0
       WH-metals

                   WH-fuel

                              WH-electronics &
                               telecom equip.
                                                 RS-specialized electric.
                                                               hh equip
                                                                            RS-food non specialized




                                                                                                                                                                                                                  RS-specialized electric.
                                                                                                                                                                                                                                hh equip
                                                                                             stores

                                                                                                      WH-computers

                                                                                                                     Sale of motor vehicles

                                                                                                                                               RS-specialized
                                                                                                                                              pharmaceuticals

                                                                                                                                                                WH-other hh goods

                                                                                                                                                                                    WH-food and beverages




                                                                                                                                                                                                                                             WH-other hh goods

                                                                                                                                                                                                                                                                  RS-specialized clothing

                                                                                                                                                                                                                                                                                            WH-food and beverages

                                                                                                                                                                                                                                                                                                                    WH-fuel

                                                                                                                                                                                                                                                                                                                              Sale of motor vehicles




                                                                                                                                                                                                                                                                                                                                                                                                                   RS-specialized computers

                                                                                                                                                                                                                                                                                                                                                                                                                                              Specialized auto fuel
                                                                                                                                                                                                                                                                                                                                                       WH-construction materials

                                                                                                                                                                                                                                                                                                                                                                                    Sale of motor vehicles parts




Figure 33: Labor productivity is low across all wholesale and retail sub-sectors, but the gap is widest
for retail in non-specialized food stores
Log value added per worker (five-year average)                                                                                                                                                                                                                                                                                                                                                                                                                        31
                                                                              WH

                                                                                            Sale of mo




                                                                                                                                                                                                                                   Sale of mo




                                                                                                                                                                                                                                                                      Sale of motor ve
                                WH-e




                                                            RS-food non




                                                                                                                                                                                                                                                                                                          Specializ
                                                                                                          RS


                                                                                                                          WH-oth




                                                                                                                                                                                  WH-oth
                                                                                                         phar




                                                                                                                                                                                                 RS-speciali
                                           RS-speciali




                                                                                                                                                                    RS-speciali
                                 tel




                                                                                                                                                                                                                                                      WH-constructi
                                                                                                                                   WH-food an




                                                                                                                                                                                                               WH-food an




                                                                                                                                                                                                                                                                                          RS-specialize
                                                                          FAIRER MARKETS FOR INCLUSIVE GROWTH


 Figure 33: Labor productivity is low across all wholesale and retail sub-sectors, but the gap is widest
 for retail in non-specialized food stores
 Log value added per worker (five-year average)
                                                                    Armenia (2018-23 avg in bars)                                                   Structural peers (2015-19 avg)
     10
      8
      6
      4
      2
      0




                                                                                                         RS-zpecialized




                                                                                                                                       Secialized




                                                                                                                                                                                                                                                 specialized
                     RS-food
           specialized stores




                                       specialized stores



                                                                            Sale of moto
                                                                           vehicles parts




                                                                                                               clothing




                                                                                                                                        auto fuel



                                                                                                                                                    Sale of motor
                                                                                                                                                         vehicles




                                                                                                                                                                                     RS-specialized
                                                                                                                                                                                         computers




                                                                                                                                                                                                                       beverages



                                                                                                                                                                                                                                                WH trade-non




                                                                                                                                                                                                                                                                                         WH-fuel
                                          RS-other non-




                                                                                                                                                                                                                     WH-food and
 Source: World Bank, based on enterprise-level datasets from the State Revenue Committee.
 Note: WH=wholesale sales, RS= retail sales. The revenue share of the top four enterprises includes enterprises in non-tradable sectors, as defined in footnote 14;
 it also excludes natural monopoly industries. These graphs include the top 10 subsectors with the largest revenue shares in Armenia in 2021–2023. Indicators for
 food-related subsectors are shown in red.



 LL $ IHZ PDUNHW SOD\HUV LQÀXHQFH WKH IRRG                                                                                                  SHUFHQW RI WKH RXWO\LQJ DUHDV WKH ODUJHVW
 wholesale and retail sector.                                                                                                                       FKDLQ EHLQJ WKH RQO\ VXSHUPDUNHW LQ RYHU 
                                                                                                                                                    SHUFHQW RI WKH DUHD ,Q SHULSKHUDO GLVWULFWV
 39. The largest supermarket chains control                                                                                                         ZKHUHFRQVXPHUFKRLFHLVDOUHDG\OLPLWHGWKHVH
 the lion’s share of the urban retail landscape                                                                                                     FRQGLWLRQV HQWUHQFK EX\HU GHSHQGHQF\ ZHDNHQ
 - both in store presence and spatial reach.                                                                                                        SULFH FRPSHWLWLRQ HVSHFLDOO\ LI VXSHUPDUNHWV
 ,Q <HUHYDQ WKUHH PDLQ FKDLQV DFFRXQW IRU                                                                                                KDYH SULFLQJ SROLFLHV WKDW GLIIHUHQWLDWH DFURVV
 SHUFHQWRIWKHWRWDOVXSHUPDUNHWVWRUHFRXQWDQG                                                                                                  UHWDLO RXWOHWV DQG FDQ FUHDWH PDUNHW PLFUR
 PRUH WKDQ  SHUFHQW RI VXSHUPDUNHWFRYHUHG                                                                                                  PRQRSROLHV 7KLV UDLVHV UHG ÀDJV IURP ERWK D
 XUEDQDUHDWKHODUJHVWFKDLQDORQHFRYHULQJ                                                                                                 FRPSHWLWLRQ DQG FRQVXPHU ZHOIDUH SHUVSHFWLYH
 percent. 2WKHU VXSHUPDUNHW FKDLQV GHVSLWH                                                                                                  6PDOOHU FKDLQV KDYH OLPLWHG H[FOXVLYH SUHVHQFH
 VWURQJ EUDQGLQJ FRPPDQG VLJQL¿FDQWO\ VPDOOHU                                                                                                 LQ JHRJUDSKLF PDUNHWV DQG RSHUDWH SULPDULO\ LQ
 PDUNHW VKDUHV DYHUDJLQJ EHWZHHQ  SHUFHQW                                                                                                 PRUH FRPSHWLWLYH HQYLURQPHQWV VXJJHVWLQJ D
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                                                                                                                                                    (FRPPHUFH RIIHUV RSSRUWXQLWLHV IRU FUHDWLQJ
 40. Location is a key competition factor in                                                                                                        FRPSHWLWLYH SUHVVXUH LQ DUHDV ZKHUH D VLQJOH
 retail. Strategic placement of large super-                                                                                                        chain operates.
 market chains across neighborhoods en-
 sures maximum reach and visibility, possibly                                                                                                       41. Spatial competition is more intense in
 crowding out space for smaller competitors.                                                                                                        central districts. However, even there and
 6SDWLDO H[FOXVLYLW\ HVSHFLDOO\ LQ SHULSKHUDO                                                                                                 for the most part, only the top three chains
 GLVWULFWV FUHDWHV ]RQHV ZKHUH FRQVXPHU FKRLFH                                                                                               are competitors. 7KHUH LV JUHDWHU FRPSHWLWLRQ
 LV VWUXFWXUDOO\ OLPLWHG 1HDUO\ WZRWKLUGV RI WKH                                                                                           LQWHQVLW\LQFHQWUDO<HUHYDQWKDQLQWKHSHULSKHU\
 VXSHUPDUNHWV LQ <HUHYDQ DUH FKDLQ RSHUDWRUV                                                                                                  EXW ULYDOU\ H[LVWV JHQHUDOO\ DPRQJ WKH ODUJHVW
 ZLWK QR GLUHFW FRPSHWLWRUV ZLWKLQ D PHWHU                                                                                               SOD\HUV2YHUODSSLQJPDUNHW]RQHVDUHSULPDULO\
 UDGLXV7KUHHRIWKHPDMRUVXSHUPDUNHWVFRQWURO                                                                                                   VKDUHG EHWZHHQ WKH WRS WKUHH VXSHUPDUNHWV 

 7KLVDQDO\VLVOHYHUDJHVSXEOLFO\DYDLODEOHJHRVSDWLDOGDWDIURP2SHQ6WUHHW0DS,WLGHQWL¿HVVXSHUPDUNHWVEHORQJLQJWR
 HLJKWPDMRUFKDLQVLQ<HUHYDQ(DFKVXSHUPDUNHWZDVPDSSHGZLWKDPHWHUUDGLXVEXIIHUWRDSSUR[LPDWHSRWHQWLDOPDUNHWFRYHUDJH
 IDFLOLWDWLQJDQXDQFHGXQGHUVWDQGLQJRIVSDWLDOGLVWULEXWLRQPDUNHWFRQFHQWUDWLRQDQGFRPSHWLWLYHG\QDPLFV7KHWRWDODUHDFRYHUHGE\
 VXSHUPDUNHWVLVNPSHUFHQWRIWKHFRYHUHGDUHDLVFRQWHVWHGE\WZRRUPRUHFKDLQVSHUFHQWLVH[FOXVLYHO\FRQWUROOHG
 E\DVLQJOHFKDLQ



32
                                                ARMENIA’S ECONOMIC PULSE


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RYHUODS EHWZHHQ WKH WRS WZR 6PDOOHU FKDLQV                      ,VVXHV UHODWHG WR GHOD\HG SD\PHQWV KDYH
VHOGRPRYHUODSVLJQL¿FDQWO\SUHIHUULQJWRRSHUDWH                     JHQHUDOO\EHHQDGGUHVVHGZLWKWKHUHIRUPV
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                                                                        &RPPLVVLRQ%XWZLWKRXWVXVWDLQHGHQIRUFHPHQW
42. In addition to spatial dominance, complex                           WR SUHYHQW KDUPIXO EXVLQHVV SUDFWLFHV WKH
vertical relationships reinforce the importance                         UHVXOWZRXOGEHDF\FOHLQZKLFK060(VUHPDLQ
of the larger supermarket chains in Armenia’s                           LQFUHDVLQJO\ GHSHQGHQW RQ ODUJH UHWDLOHUV DQG
food retail sector, e.g., suppliers reported                            PDUJLQDOL]HGZLWKLQWKHYDOXHFKDLQ
being bound by unfavorable terms ranging
from delayed payments to hidden slotting                                Examining the evolution of producer and
fees, which the smaller suppliers cannot                                consumer food prices as an indicator of
afford. ,Q DGGLWLRQ WR FRPSHWLQJ IRU ORFDWLRQ                   PDUNHWHI¿FLHQF\
VPDOOHU DQG HQWUDQW VXSHUPDUNHWV FDQ DOVR EH
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LQWHJUDWLRQ RU ORQJVWDQGLQJ YHUWLFDO DJUHHPHQWV                   prices to consumers in selected food products
E\WKHODUJHVWVXSHUPDUNHWV/RFDWLRQDQGYHUWLFDO                     SRLQWVWRLQHI¿FLHQFLHVDORQJWKHVXSSO\FKDLQ
LQWHJUDWLRQ DIIHFW SULFH FRPSHWLWLRQ :KHQ WKH                    and potential market power at the retail level.
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VPDOOHU HQWHUSULVHV VWUXJJOH WR SDUWLFLSDWH 7KLV                 PDUNHWVWUXFWXUHDQGRYHUDOOVHFWRUSHUIRUPDQFH
SRZHULPEDODQFHLVUHLQIRUFHGE\PDMRUUHWDLOHUV                       DQGLVDOVRUHYHDOHGWKURXJKWKHSULFLQJEHKDYLRU
RFFXS\LQJ NH\ ORFDWLRQV JLYLQJ WKHP DQ HYHQ                     RI PDUNHW SDUWLFLSDQWV %R[  H[DPLQHV WKH
JUHDWHULQÀXHQFHRYHUFRQVXPHUVSURGXFHUVDQG                        FKDQJHV LQ SULFHV IRU VHOHFWHG IRRG SURGXFWV
GLVWULEXWRUVZKRDOOUHO\RQWKHP,QWHUYLHZV22 with                    XVHGIRU&3,HVWLPDWLRQVDQGKLJKOLJKWVIULFWLRQV
VXSSOLHUVUHYHDOHGWKDWPDQ\IDFHGXQIDLUWHUPV                        DQGGHOD\VLQWKHWUDQVPLVVLRQRISULFHFKDQJHV
LQ WKHLU GHDOLQJV ZLWK VXSHUPDUNHWV $ JURZLQJ                   IURPSURGXFHUVRUJOREDOPDUNHWVWRFRQVXPHUV
WUHQG LV H[SDQVLRQ RI SULYDWHODEHO SURGXFWV                     This analysisRISULFHGDWDIURPDQG
ZLWKVXSHUPDUNHWVUHSODFLQJJRRGVIURPRXWVLGH                         VKRZVGLYHUJHQFHVLQWKHHYROXWLRQRIUHWDLOSULFHV
VXSSOLHUV ZLWK RZQEUDQG DOWHUQDWLYHV $OWKRXJK                    SURGXFHUSULFHVDQGJOREDOSULFHVIRUFHUWDLQIRRG
SUR¿WDEOH IRU UHWDLOHUV WKH SUDFWLFH UHGXFHV WKH                LWHPVSDUWLFXODUO\LQ4'HVSLWHGHFOLQLQJ
GLYHUVLW\RISURGXFWVDYDLODEOHWRFRQVXPHUVDQG                       producer prices and stable transportation costs
WKUHDWHQVWKHVXUYLYDORILQGHSHQGHQWVXSSOLHUV,Q                    RYHU WKLV SHULRG UHWDLO SULFHV IHOO OHVV DQG HYHQ
DGGLWLRQKLGGHQRUXQFOHDUVORWWLQJIHHVSD\PHQWV                    LQFUHDVHG LQ VRPH FDVHV VXJJHVWLQJ LVVXHV
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0RUHEURDGO\WKURXJKEXVLQHVVGHFLVLRQVWKDWGHWHUPLQHZKHWKHUFRQVXPHUVDUHJHWWLQJWKHEHVWGHDOVLQWHUPVRISULFHTXDOLW\DQG
SURGXFWYDULHW\
7KHSULFHDQDO\VLVZDVFRQGXFWHGIRUWKHWRSIRRGSURGXFWVLQWKHFRQVXPSWLRQEDVNHWDVSHUWKH&RQVXPHU3ULFH,QGH[&3,
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with World Bank data on international food prices.



                                                                                                                                      33
                           FAIRER MARKETS FOR INCLUSIVE GROWTH


 Box 4: Armenia’s selected food prices: what is driving the trends?

     )RUWKHWRSIRRGSURGXFWVFRQVXPHG, retail prices generally fell in 2024 compared to 2023.
     However, for most products, retail prices increased in Q4 2024 compared with Q4 2023. By
     FRPSDULVRQSURGXFHUSULFHVIRUWKHVHVDPHSURGXFWVVKRZHGPRUHSURQRXQFHGUHGXFWLRQVRYHUWKH
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     LVVXHVDORQJWKHVXSSO\FKDLQSDUWLFXODUO\IRUWKHVHOHFWHGSURGXFWV

     Divergence between retail, producer, and international price trends for these products was
     observed in 2024, particularly in Q4.)RUNH\VWDSOHVDYHUDJHUHWDLOSULFHVLQFUHDVHGPRUHWKDQ
     DYHUDJHSURGXFHUSULFHVURVHDQGGHFUHDVHGOHVVWKDQSURGXFHUSULFHVIHOOSDUWLFXODUO\IRUZKHDW
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     RI ZKHDW FRQVXPSWLRQ DQG  SHUFHQW RI FKLFNHQ FRQVXPSWLRQ WKHUHIRUH LPSRUWV LQFOXGLQJ UDZ
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     SULFHVLQ<HUHYDQIHOOSHUFHQWZKLOHSURGXFHUSULFHVIHOOSHUFHQWDQGJOREDOSULFHVSHUFHQW
     )LJXUH % 5HWDLO VDXVDJH SULFHV URVH  SHUFHQW ZKLOH SURGXFHU SULFHV IHOO  SHUFHQW UHWDLO
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     ZKLOHLQDYHUDJHWUDQVSRUWDWLRQFRVWVIHOOSHUFHQW7KLVVXJJHVWVWKDWFRVWVDYLQJVDUHQRW
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     PDUNHWSRZHUDWWKHUHWDLOOHYHO

     In 2024 on average, the CPI data show wide and persistent retail-producer price spreads,
     especially IRUZKHDWÀRXUSHUFHQWRIWKHUHWDLOSULFHDQGFKLFNHQSHUFHQW(YHQHVVHQWLDO
     LWHPVVXFKDVEUHDGDQGODYDVKKDGVSUHDGVRIXSWRSHUFHQWDQGSHUFHQWUHVSHFWLYHO\&KHHVH
     KDGWKHORZHVWVSUHDGSHUFHQWRQDYHUDJHKLQWLQJDWPRUHFRPSHWLWLYHSULFLQJRULPSRUWHGVXSSO\
     ,QPDQ\FDVHVWKHVHVSUHDGVZHUHFRPSRXQGHGE\KLJKSULFHGLVSHUVLRQZLWKLQFLWLHVIXUWKHUKLQWLQJ
     DW PDUNHW SRZHU GXH WR SURGXFW GLIIHUHQWLDWLRQ RU ZHDN FRQVXPHU SULFH WUDQVSDUHQF\ 5HWDLO SULFH
     GLVSHUVLRQZLWKLQWKHVDPHSURGXFWFDWHJRU\PD\IXUWKHUVLJQDOSRWHQWLDOFRPSHWLWLRQLVVXHVSURGXFW
     GLIIHUHQWLDWLRQDQGZHDNFRQVXPHUVZLWFKLQJ)RULQVWDQFHUHWDLOSULFHVIRUZKHDWEUHDGVKRZHGXS
     WRSHUFHQWGLVSHUVLRQZLWKZKHDWÀRXUXSWRSHUFHQWDVPHDVXUHGE\WKHDYHUDJHPRQWKO\
     FRHI¿FLHQWRIYDULDWLRQ

     The prevailing structure of Armenia’s food industry reveals a high level of concentration.
     &RPSHWLWLRQDORQJWKHYDOXHFKDLQPDWWHUVIRU¿QDOFRQVXPHUJRRGV,QWKHJUDLQPLOOLQJLQGXVWU\
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     RIWKHZKROHVDOHPDUNHW



34
                                                                                       ARMENIA’S ECONOMIC PULSE


Figure B4-1: In 2024, wheat retail prices show                                                                       Figure B4-2: Chicken retail prices increased in
an increasing/less pronounced declining trend,                                                                       2023, whereas producer and global prices
compared with global prices                                                                                          declined
Index (Jan 2023=100)                                                                                                 Index (Jan 2023=100)

 100                                                                                                                  110

  90                                                                                                                  100

  80                                                                                                                   90

  70                                                                                                                   80

  60                                                                                                                   70

  50                                                                                                                   60
       2023-01

                 2023-03

                           2023-05

                                     2023-09

                                               2023-11

                                                         2024-01

                                                                   2024-03

                                                                             2024-05

                                                                                       2024-07

                                                                                                 2024-09

                                                                                                           2024-11




                                                                                                                            2023-01

                                                                                                                                      2023-03

                                                                                                                                                2023-05

                                                                                                                                                          2023-09

                                                                                                                                                                    2023-11

                                                                                                                                                                              2024-01

                                                                                                                                                                                        2024-03

                                                                                                                                                                                                  2024-05

                                                                                                                                                                                                            2024-07

                                                                                                                                                                                                                      2024-09

                                                                                                                                                                                                                                2024-11
                           Flour, producer level, national                                                                                      Chicken, producer level, national
                           Flour, retail level, Yerevan                                                                                         Chicken, retail level, Yerevan
                           Global wheat price index                                                                                             Global chicken price index
                           Linear (Global wheat price index)                                                                                    Linear (Global chicken price index)

Source: World Bank staff calculations based on Armstat and World Bank data
Note: The spread is calculated as the difference of retail and producer prices; as a percentage of the retail price in Yerevan,
considering average monthly retail prices per product type for January-December 2024 and average producer prices. The
producer price is calculated as a simple average of all prices for the same product from various producers when data for
more than one producer is provided.


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       The functioning of retaLOPDUNHWVLQWKHFRQWH[WRIOLPLWHGGLYHUVL¿FDWLRQRILPSRUWVYHUWLFDO
       relationships and the performance of food manufacturing affect retail food prices. Without
       LPSURYHGPDUNHWWUDQVSDUHQF\SHULRGLFHYDOXDWLRQRIPDUNHWVDORQJIRRGSURGXFWYDOXHFKDLQVDQG
       FRQWLQXHGSURDFWLYHHQIRUFHPHQW$UPHQLDQKRXVHKROGVPD\PLVVRXWRQIRRGFRVWVDYLQJVGHVSLWH
       IDYRUDEOHWUHQGVLQSURGXFHUSULFHVRULQWHUQDWLRQDOPDUNHWV7KH&&3&KDVEHHQDFWLYHO\FDUU\LQJ
       out studies in food productsb DQG FRQWULEXWLQJ WR SULFH WUDQVSDUHQF\ WKURXJK LWV 3ULFH 0RQLWRULQJ
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       SURFRPSHWLWLRQVROXWLRQV
a. This analysis is based RQ:RUOG%DQNGDWDDYDLODEOHDWKWWSVPLFURGDWDZRUOGEDQNRUJLQGH[SKSFDWDORJVWXG\
description and KWWSVZZZZRUOGEDQNRUJHQUHVHDUFKFRPPRGLW\PDUNHWV
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                                                                                                                                                                                                                                          35
                                                  FAIRER MARKETS FOR INCLUSIVE GROWTH


 LLL           5HJXODWRU\                    IUDPHZRUNV                     DQG          WKHLU                     %DUULHUV WR FRPSHWLWLRQ LQ SURIHVVLRQV DQG UHWDLO
 implementation matter to instill competition                                                                             DQG %DUULHUV WR HQWU\ LQ SURIHVVLRQV DQG
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                                                                                                                         DYHUDJHV VXJJHVWLQJ WKDW DW WKH QDWLRQDO OHYHO
 44. The relatively few formal barriers to retail                                                                        OHJDO DQG IRUPDO EDUULHUV DUH QRW WKH SULPDU\
 entry in Armenia’s product market regulations                                                                           FRQVWUDLQWVRQFRPSHWLWLRQLQUHWDLO
 are related to high administrative burdens
 and barriers to entry in services and network                                                                           45. Structural market characteristics also
 sectors. $OWKRXJK $UPHQLD KDV JUHDWHU RYHUDOO                                                                     limit contestability.7KHVPDOOVL]HRI$UPHQLD¶V
 SURGXFW PDUNHW UHJXODWLRQ 305 UHVWULFWLRQV                                                                       PDUNHW UHGXFHV RSSRUWXQLWLHV RI VFDOH )XUWKHU
 FRPSDUHG ZLWK DVSLUDWLRQDO SHHUV GH MXUH                                                                         SURSHUW\ GHYHORSHUV FDQ DIIHFW VWRUH ORFDWLRQ
 UHJXODWRU\EDUULHUVWRHQWU\LQWKHUHWDLOVHFWRUDUH                                                                  DQGDFFHVVWRSULPHUHWDLOVSDFHGLVDGYDQWDJLQJ
 UHODWLYHO\ ORZ 7KH PDLQ UHJXODWRU\ FRQVWUDLQWV                                                                   VPDOOHU VXSSOLHUV ZKR UHO\ RQ YLVLELOLW\ DQG
 UHÀHFW OLPLWHG VWDNHKROGHU HQJDJHPHQW ZLWK                                                                         SUR[LPLW\WRFRQVXPHUV,QWKHDEVHQFHRIVWURQJ
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                                                                                                                         HQWHUDQGVXVWDLQDSUHVHQFHLQWKHVXSHUPDUNHW
 ,Q UHWDLO SULFH UHJXODWLRQ ZLWK DQ LQGH[ RI  LV                                                           sector. The adopted updates to the unfair trade
 RQ SDU ZLWK WKH XSSHUPLGGOHLQFRPH FRXQWU\                                                                       SUDFWLFHVOHJDOIUDPHZRUNDUHDVWHSLQWKHULJKW
 80,& DYHUDJH EXW PRUH UHVWULFWLYH WKDQ WKH                                                                    direction.
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Figure 34: Retail price regulations in Armenia are on par with the UMIC average but more restrictive
than the HIC average
Economy-wide PMR select low-level Indicators: Armenia versus UMIC and HIC averages 2024, 0–6 (least to most restrictive)
            4
           3.5                                                                                                  Armenia                  Average HIC                           Average UMIC
            3
           2.5
2023 PMR




            2
           1.5
            1
           0.5
            0
                   Governance
                      of SOEs



                                Consulting on
                                  Legislation



                                                   Barriers to
                                                        Entry



                                                                  Barriers to
                                                                 Competition



                                                                                    Administrative
                                                                                   and Regulatory
                                                                                          Burden



                                                                                                          Retail Price
                                                                                                          Regulation



                                                                                                                          Assesment of
                                                                                                                             Impact on
                                                                                                                           Competition


                                                                                                                                         Administrative
                                                                                                                                         Requirements




                                                                                                                                                                                   Public
                                                                                                                                         for New Firms


                                                                                                                                                               Barriers to
                                                                                                                                                           Competition in
                                                                                                                                                          Professions and
                                                                                                                                                                    Retail



                                                                                                                                                                             Procurement




                                                                                                                                                                                              Professions and
                                                                                                                                                                                                         Retail


                                                                                                                                                                                                                     Quality and Scope
                                                                                                                                                                                                                   of Public Ownership
                                                                                                                                                                                            Barriers to Entry in




                                                  Energy, Transport and
                                                   E-communications

Source: OECD PMR data, 2024; WBG-OECD PMR data for Armenia, 2024 (unpublished); 2023 PMR Methodology.
Note: X-axis categories correspond to select low-level indicators from the PMR and are shortened for conciseness. Administrative and Regulatory Burden corresponds to
communication and simplification of administrative and regulatory burden. Administrative Requirements for New Firms correspond to administrative requirements for LLCs
and personally-owned enterprises. Barriers to Entry in Energy, Transport and E-communications corresponds to barriers to entry in network sectors. Barriers to Competition
in Energy, Transport and E-communications corresponds to involvement in business operations in network sectors. Barriers to Entry in Professions and Retail corresponds to
barriers to entry in service sectors. Barriers to Competition in Professions and Retail corresponds to involvement in business operations in service sectors. Retail Price
Regulation corresponds to retail price controls and regulation. Consulting on Legislation corresponds to interaction with stakeholders.



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36
                                                  ARMENIA’S ECONOMIC PULSE


46. Armenia’s antitrust legal framework is                                  QHJRWLDWLQJ SRVLWLRQ WKDW LQ RWKHU FRQWH[WV IRU
largely aligned with international practice, but                            H[DPSOHLQ-DSDQDQG.RUHDKDVEHHQXVHGWR
adequate resources for the Competition and                                  DGGUHVVLVVXHVLQUHWDLOPDUNHWVGLJLWDOSODWIRUPV
Consumer Protection Commission (CPCC)                                       RU VXEFRQWUDFWLQJ IRU PDQXIDFWXULQJ $V &&3&
and strategic enforcement are needed. The                                   IXUWKHU LPSOHPHQWV WKHVH SURYLVLRQV JXLGHOLQHV
&&3&KDVLVVXHGYDULRXVJXLGHOLQHVWRHQKDQFH                              VKRXOG EH GHYHORSHG WR JXLGH VWDNHKROGHUV
SUHGLFWDELOLW\RIDEXVHRIGRPLQDQFHDQGPHUJHU                            (QKDQFLQJ WKH &&3&¶V KXPDQ UHVRXUFHV
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WKHSULYDWHVHFWRU)RUH[DPSOHWKHDVVHVVPHQW                            DXWRQRP\ LV QHHGHG WR DGGUHVV FRPSOH[ FDVHV
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                                    26


RI PDUNHW SRZHU *LYHQ WKH ODFN RI D UHEXWWDEOH                    48. The latest amendments to the competition
SUHVXPSWLRQIRUGRPLQDQFHDEXVHRIGRPLQDQFH                              law27        regarding unfair competition and
FDVHV E\ ¿UPV WKDW GR QRW KDYH DFWXDO PDUNHW                       consumer protection enhance the current
SRZHUQHHGWRSURFHHGWRWKHHYDOXDWLRQRIDEXVH                           framework, and now enforcement is required
VWDJH DIIHFWLQJ DGPLQLVWUDWLYH HI¿FLHQF\ 6XFK                        to encourage supermarket compliance. A
DQ DSSURDFK PLJKW KDYH D FKLOOLQJ HIIHFW RQ WKH                    FRPSUHKHQVLYH IUDPHZRUN DQG LQVWLWXWLRQDO
PDUNHW GLVFRXUDJLQJ VPDOOHU FRPSDQLHV IURP                            VHWXS IRU FRQVXPHU SURWHFWLRQ DQG XQIDLU WUDGH
JURZLQJ7KHSRVVLELOLW\RIDVVHVVLQJGRPLQDQFH                            SUDFWLFHV KDV EHHQ HVWDEOLVKHG ZLWK WKH &&3&
EDVHGRQPDUNHWSRZHULVLPSRUWDQWIRUPXOWLVLGHG                          UHVSRQVLEOHIRULPSOHPHQWLQJLW6SHFL¿FDFWLRQVWR
PDUNHWV 6XSHUPDUNHWV DFWLQJ DV LQWHUPHGLDULHV                         ERRVWSULFHWUDQVSDUHQF\LQFOXGHGWKHREOLJDWLRQ
DQG GLJLWDO PDUNHWV ZLWK PXOWLVLGHG G\QDPLFV                         to display unitary prices. Penalties for late
QHWZRUN HIIHFWV DQG GDWD XVDJH UHTXLUH VXFK                         SD\PHQWWRVXSSOLHUVKDYHDOVREHHQLQWURGXFHG
PRUHQXDQFHGDQDO\VHV                                                      LQ SUHYLRXV DPHQGPHQWV DQG WKH &&3& KDV
47. The merger control framework in Armenia                                 EHHQDFWLYHO\HQIRUFLQJWKHVHUXOHV&&3&LVDOVR
includes both dominance (qualitative criteria)                              HPEDUNLQJRQHQIRUFLQJUXOHVUHODWHGWRVXSHULRU
and objective thresholds, such as turnover                                  EDUJDLQLQJ SRVLWLRQV HVSHFLDOO\ WR DQDO\]H
RU DVVHWV DV D QRWL¿FDWLRQ WULJJHU ZKHUHDV                         VXSSOLHUVXSHUPDUNHW              UHODWLRQVKLSV         *RLQJ
international practice calls for using only                                 IRUZDUGLWLVLPSRUWDQWWRHQFRXUDJHDGRSWLRQRI
objective       thresholds         to     enhance         clarity.          PRUH SURPSW DQG HIIHFWLYH PHFKDQLVPV WR GHDO
)XUWKHUPRUHWKHQRWL¿FDWLRQYDOXHVDUHUHODWLYHO\                         ZLWK FRPSODLQWV IURP FRQVXPHUV DQG VXSSOLHUV
ORZ 7KHVH SURYLVLRQV DUH SDUWLFXODUO\ LPSRUWDQW                      LQFOXGLQJ DOWHUQDWLYH GLVSXWH UHVROXWLRQV ,W
to ensure a risk-based approach that reduces                                will also be critical to boost transparency in
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                                                                                                                                             37
                                    FAIRER MARKETS FOR INCLUSIVE GROWTH


 6LJQL¿FDQWVKRUWFRPLQJVDORQJ$UPHQLD¶s                                     ¿HOG ,Q VLPLODU FRQWH[WV YDULRXV FRPSHWLWLRQ
 food value chain in terms of transparency                                       DXWKRULWLHV KDYH FRQGXFWHG FRPSUHKHQVLYH
 have limited the ability of MSMEs to compete                                    PDUNHWDVVHVVPHQWV to identify actions to boost
 effectively - but it is expected that effective                                 FRPSHWLWLRQ FRQVXPHU FKRLFH DQG HIIHFWLYH
 compliance with the unfair trade practices                                      SDUWLFLSDWLRQ LQ PDUNHWV DQG WR IDFLOLWDWH PRUH
 framework could help. For example, small                                        HIIHFWLYH060(SDUWLFLSDWLRQ
 suppliers.)RUH[DPSOHVPDOOVXSSOLHUVUHSRUWHG
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 KDV DFFHVV WR  LQ RUGHU WR VFUHHQ IRU UHG ÀDJV
 WKDWPHULWGHHSHULQYHVWLJDWLRQ

 50. Real time market analyses are necessary
 and will require strengthening tools to analyze
 pricing and trade volumes in wholesale and
 retail markets, including digital services
 that monitor retailer’s websites and market
 observatories - the latter building on the
 efforts of the current price observatory. There
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38
                                        ARMENIA’S ECONOMIC PULSE



              2.5 CONCLUSIONS                            53. Addressing these problems requires
                                                         targeted reform that goes beyond adjusting

51. While Armenia’s legal framework for                  laws alone. 6WUHQJWKHQLQJHQIRUFHPHQWFDSDFLW\

regulating competition is generally aligned              UH¿QLQJ OHJDO SURYLVLRQV DQG HQKDQFLQJ PDUNHW

with international standards, in practice, gaps          WUDQVSDUHQF\DUHDOOFULWLFDO(TXDOO\LPSRUWDQWLV

and structural issues undermine fair market              LQWURGXFLQJ WRROV WR UHEDODQFH VXSSOLHUUHWDLOHU

operations. (QIRUFHPHQW FKDOOHQJHV DQDO\WLFDO       UHODWLRQVKLSVDQGHQVXULQJEHWWHUGLJLWDOWRROVIRU

FRQVWUDLQWV DQG LPEDODQFHG VXSSOLHUUHWDLOHU        PRQLWRULQJ DQG RYHUVLJKW EDVHG RQ LQWHJUDWHG

UHODWLRQVKLSVULVNVWLÀLQJFRPSHWLWLRQHVSHFLDOO\LQ   GDWD V\VWHPV LQFOXGLQJ XSGDWHG WRROV WR

UHWDLO DQG ZKROHVDOH PDUNHWV7KHVH FKDOOHQJHV      collect national price statistics. The table below

GLVSURSRUWLRQDWHO\ DIIHFW 060(V ZKLFK KDYH         VXPPDUL]HV WKH PDLQ FKDOOHQJHV WR FRPSHWLWLRQ

VWUXJJOHG WR DFFHVV VXSHUPDUNHW VXSSO\ FKDLQV     LQ$UPHQLDDQGKLJKOLJKWVSULRULW\DFWLRQVWRFUHDWH

QHJRWLDWH IDLU WHUPV DQG EHQH¿W IURP D OHYHO    DIDLUHUPRUHG\QDPLFPDUNHWHQYLURQPHQW

             $VDUHVXOWFRQVXPHUFKRLFHVXSSOLHU
SOD\LQJ¿HOG
GLYHUVLW\ DQG LQQRYDWLRQ ZRXOG EH FRQVWUDLQHG
$GGUHVVLQJWKHVHVKRUWFRPLQJVUHTXLUHVVWURQJHU
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WDUJHWHG FRPSHWLWLRQ DVVHVVPHQWV DFURVV YDOXH
FKDLQV XVLQJ WKH GHWDLOHG ¿UPDQG SURGXFWOHYHO
GDWD WKDW &&3& SRVVHVVHV WR HQVXUH GH IDFWR
PDUNHWRSHQQHVVPDWFKHVGHMXUHFRPPLWPHQWV


52. Without decisive implementation and
enforcement of regulations for competition,
consumer protection, and fair trade, the
current     dynamics      risk    further   eroding
productivity,      misallocating         resources,
GHWHUULQJLQYHVWPHQWVWLÀLQJLQQRYDWLRQDQG
reducing consumer welfare, all of which will
ultimately curtail economic growth. ,QJHQHUDO
XQFKHFNHG PDUNHW SRZHU LQ WKH VXSHUPDUNHW
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                             FAIRER MARKETS FOR INCLUSIVE GROWTH



       2.6 TABLE OF RECOMMENDATIONS - WHAT CAN BE DONE?
     COMPETITION PROBLEM
                                                   KEY ACTION TO ADDRESS THE PROBLEM
         IN ARMENIA
      Legal alignment gaps:        Refine the legal framework as needed to enhance effectiveness and
                                   support the business environment:
      Specific provisions on               Consider integrating a rebuttable market share threshold to
     anticompetitive practices             define dominance to boost administrative efficiency and limit
        and merger control                 the potential chilling effect on entrants and growing firms.
     framework could further
      integrate international              Assess the current merger notification thresholds based on the
             practice                      previous years' experiences to identify options for reducing
                                           undue administrative burdens on CCPC and businesses.
                                           Consider the possibility of CCPC ex officio investigations to
                                           integrate a risk-based approach into merger control.

       Constrained CCPC            Increase financial/human resources:
          resources:
                                           Invest in training and digital tools to assess markets, carry
       Expanding strategic                 out investigations, and effectively prosecute infringements
     enforcement and market                of the competition law.
      monitoring would need                Ensure resources are available to implement the new
     more human resources,                 consumer protection and unfair trade practices framework.
       analytical tools, and
        financial resources


         Complex vertical          Develop fair trade guidelines, set clear guidance on shelf slotting fees
          relationships:           and return policies in the supermarket retail sector based on the
                                   enforcement of provisions on abuse of the superior bargaining position.
          Imbalances in                    Introduce independent mediation frameworks and streamlined
         supplier-retailer                 complaint mechanisms.
           relationships
                                           Integrate lessons learned from the implementation of
                                           frameworks/regulatory models that offer viable tools to
                                           rebalance market relationships. e.g., the EU’s Directive on
                                           Unfair Trading Practices, the UK’s Groceries Code Adjudicator,
                                           and Australia’s Food and Grocery Code all aim to equalize
                                           bargaining positions, enhance transparency, and protect
                                           supplier rights.
                                   Further implement provisions on abuse of strong negotiating power and
                                   develop guidelines, drawing on implementation lessons from Korea and
                                   Japan.
                                   Consider carrying out a market enquiry to identify other workable
                                   measures to boost competition and fair trade in the retail sector (e.g.
                                   South Africa) integrating in-depth analysis of firm and product-level
                                   data.

     Transparency shortfalls:      Consider building on the current CCPC’s price monitoring tool to design
                                   a National Digital Price-Transparency Framework to trace digital
        Inadequate market          transactions and provide real-time data and red flags for enforcement.
     transparency due to data      In the food retail sector, pilot a digital auction platform for staple food
          analytics gaps           products.
                                   Develop an integrated digital tool for the systematization of
                                   customs/import data, wholesale and retail prices that can feed into
                                   national statistics, CCPC advocacy studies and research by
                                   independent researchers.
                                   Promote interagency collaboration.



40
                                                   ARMENIA’S ECONOMIC PULSE



                      ANNEX 1: MACROECONOMIC INDICATORS

Armenia: Key Macroeconomic Indicators

                                                                    2022         2023      2024e    2025f    2026f    2027f

 Real economy (annual percentage change)
   GDP (Nominal -- Local Currency)                                  21.6          11.7      7.4      7.1      8.0      7.8
   Real GDP                                                         12.6           8.3      5.9      5.2      4.9      4.7
   GDP per capita (USD, nominal)                                    40.3          24.1      4.9      6.4      5.5      5.6
 Contributions to Real GDP Growth (annual percentage change)
   Private Consumption                                               5.6           6.1      8.0      6.0      4.7      4.0
   Gross Fixed Investment                                           14.0           9.0      11.2     10.1     8.9      7.8
   Exports                                                          59.9          35.8      27.6    -30.0     2.1      2.7
   Imports                                                          35.0          35.4      28.3    -24.8     4.1      3.9
  Unemployment Rate (ILO Definition) (%)                            13.5          12.4      13.9
   CPI (year-average) (%)                                            8.6           2.0      0.3      3.0      3.0      3.0
 Fiscal Account (percentage of GDP)
   Expenditures                                                     27.3          27.8      29.9     31.7     30.9     30.7
   Revenues                                                         25.1          25.9      26.5     26.7     26.7     27.0
   Overall Fiscal Balance                                           -2.2          -1.9      -3.5     -5.0     -4.2     -3.7
   General Government Debt                                          46.7          48.2      48.0     51.3     53.4     55.4
 Balance of Payments (percentage of GDP)
   Current Account Balance                                           0.7          -2.8      -4.6     -5.0     -4.9     -4.8

   Imports, Goods and Services                                      53.5          62.3      76.3     54.5     53.3     52.2

   Exports, Goods and Services                                      53.0          60.9      73.5     49.5     47.8     46.6

   Net FDI, Inflow                                                   4.7           2.2      0.3      2.1      2.4      2.7

   Gross Reserves                                                   21.1          14.9      14.2     14.9     15.7     15.9

   External Government Debt                                         27.3          25.4      23.1     25.2     26.5     27.5

   Exchange Rate (per USD, average)                                  436          392       393

 Other memo items
   GDP nominal in USD (millions)                                  19,514        24,186     25,955   27,433   28,754   30,187

Source: Ministry of Finance; staff calculations; World Bank projections
Note: (e) means estimate, (f) means forecast. The projections are as at end-August 2025.




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                                                 FAIRER MARKETS FOR INCLUSIVE GROWTH



           ANNEX 2: CONCENTRATION AND LABOR PRODUCTIVITY
                             (2018-2019)


Figure A2-1: In most sectors, concentration levels were higher in Armenia
compared to peer countries
Concentration (2018–2019 average revenue share of top 4 enterprises)
                                                                       Armenia                                   Structural peers
100%

 80%

 60%

 40%

 20%

     0%




                                                                                                                                                                                                           Professional


                                                                                                                                                                                                                              Real estate
             Energy


                        Water supply




                                                         ITC


                                                                       Financial




                                                                                                        Mining


                                                                                                                        Arts


                                                                                                                                        Admin/support


                                                                                                                                                          Hospitality


                                                                                                                                                                            Construction


                                                                                                                                                                                            Commerce
                                         Transport




                                                                                       Manufacturing




 Figure A2-2: Labor productivity is low across all sectors compared to peer
 countries
 Labor productivity levels (2018–2019 average)
                                                                        Armenia                                  Structural peers

 10,0

  8,0

  6,0

  4,0

  2,0

  0,0
          Financial


                      Energy


                                       Mining




                                                                                   Professional


                                                                                                       ICT




                                                                                                                                                                        Hospitality


                                                                                                                                                                                           Arts


                                                                                                                                                                                                       Water supply


                                                                                                                                                                                                                          Real estate
                                                     Construction


                                                                    Transport




                                                                                                                    Manufacturing


                                                                                                                                    Admin/support


                                                                                                                                                        Commerce




42
                                ARMENIA’S ECONOMIC PULSE



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