Armenian News Network / Groong


Conversation on Groong:

The State of Armenia’s Economy



March 10, 2022


     Vache Gabrielyan


     Asbed Kotchikian

     Hovik Manucharyan



Hello and welcome to the Armenian News Network, Groong.


In this Conversations on Groong episode, we’ll talk about whether the Armenian economy is on sound footing coming through the pandemic years, the 44-day war, and as it heads into turbulent times in the region, given the war in Ukraine, and the tough decisions ahead to conform to Azerbaijan and Turkey’s demands.


This episode was recorded on Thursday, March 9, 2022.


To talk about these issues, we are joined by:


Dr. Vache Gabrielyan who is the Dean of the Manoogian Simone College of Business and Economics at the American University of Armenia and specializes in public administration and economics. Since 2008, he has served as Vice-Governor of the Central Bank of Armenia, Minister of Finance, Minister-Chief of the Government Staff, Chief Advisor to the Prime Minister, as well as the Deputy Prime Minister of Armenia, and the Minister of International Economic Integration and Reforms.


The State of Armenia’s Economy


Risk from the Ukraine War

We want to take a look at the state of the economy since the “Velvet revolution” events of 2018, but it’s hard to pick a starting point because so much has been happening. Maybe we can start at the current moment with the war in Ukraine, Sanctions on Russia, and their effect on Armenia.


As a result of the war in Ukraine, Russia is going to be under severe economic stress because of the western sanctions. Given the Armenian economy’s dependence and exposure to Russia as its top trading partner, can you describe the risk to the Armenian economy from this crisis, both macroeconomic and microeconomic in the short, medium, and long term?


      Are there specific sectors that are most at risk? What would you watch out for?

      Is there an opportunity here as well? Considering the presumed potential flight of capital and human resources (which are already in plain sight on the streets of Yerevan), could Armenia act as a safe haven for Russian capital and possibly human resources? Could this also carry the risk of being perceived as helping Russia bypass sanctions?


With the crash of the Russian Ruble, what is the potential effect of the Russian debt on the economies of Armenia and regional countries? In economic circles, there’s talk of a potential  worldwide credit crunch that could impact developing economies like Armenia the most?


There are some special rules in place allowing Russian companies to pay back foreign debt in Rubles.

      What does this mean for Armenia and Armenian companies?

      What about other developing countries, for example EAEU countries with whom we have large trading relations?

      Russia has an alternative to the international SWIFT system for connecting banks around the world: SPFS. Are Armenian banks connected to it? Can they connect to multiple such systems?

      Is China connected to SPFS?


Pandemic, War and Beyond Economy

The past 2-3 years have been very unusual not only in Armenia, but the whole world. The pandemic alone is a completely abnormal experience, and of course the 44-Day war in Artsakh was another shock to Armenia’s economic and military systems.

The pandemic and the war should have had a catastrophic impact on the economy, but at first glance, GDP numbers do not indicate a disastrous state of affairs. And while Foreign Direct Investment (FDI) has steeply declined (zeroed out?), there has been a very significant infusion of new debt.

The national debt has grown significantly, nearly $1.5 Billion since the pandemic started and that is not even counting potential new debt from the announced multi-billion dollar aid package from the EU.

      Can Armenia’s avoidance of a complete financial crisis be simply explained by heavy borrowing or is there a more nuanced explanation?

      To what do you attribute the relative stability of Armenia’s currency through the pandemic and the war?

It’s been a year and a half since the war ended, and in 2021 the Armenian economy grew 5.8%, but of course from extremely low pandemic levels. Even so, it is much lower than the promised “double-digit” growth. In fact, in early 2021 Minister of Economy Vahan Kerobyan even claimed that the Armenian economy had “almost recovered”.

      Has it recovered?

      When challenged about his rosy predictions, Kerobyan responds that his job is to “give hope” to the people by sharing optimistic forecasts, which may not be very realistic. Is this approach correct?

      How has the internal structure of Armenia’s economy shifted over the past 3 years?

      How would you assess the government’s 5-year program as it concerns economic development?

      Does Armenia need a “new deal” style nationwide infrastructure initiative to modernize the entire country? What would be the cost of such an investment in its own future?

Currently Armenia’s income tax rate is roughly around 25%.

      Are budget revenues, and the tax rate at an appropriate, and sustainable level for the country?

      Does the budget support our national security needs? If not, at what level does our spend need to be?



Normalization with Turkey and Corridor Economics

As we know, Armenia and Turkey are holding negotiations to establish diplomatic relations and opening their border. While everyone agrees that neighboring countries should talk and have relations, it is unclear what the economic benefits are going to be for Armenia.

      How would Armenia’s economy be affected today if borders with Turkey were opened?

      Are warnings about the “Batumization” of the Armenian economy exaggerated?

      What does Armenia need to do in order to prevent negative effects on its economy as a result of opening the border with​​ Turkey?

      What about Turkish capital buying real estate in Armenia?


On the eastern front, prime minister Pashinyan wants to sign a peace treaty with Azerbaijan and open borders with them and allow all sorts of transit through Armenia. Similar questions arise with this situation as well.

      Would Armenia benefit from allowing so-called “open communications” and trade with Azerbaijan?


Much is said about Armenia benefiting from rail transit through Azerbaijan, whether towards Iran or even towards Russia. In the past two weeks work has begun on the railway from Yerevan, through Nakhichevan and to Iran and Azerbaijan.

      Do you expect a bump to the national budget due to these projects, and if so, then how much?



That concludes this Conversations On Groong episode. We hope it was helpful in your understanding of some of the issues involved. We look forward to your feedback, including your suggestions for Conversation topics in the future. Contact us on our website, at, or on our Facebook PageANN - Groong”, or in our Facebook Group “Groong - Armenian News Network.


Special thanks to Laura Osborn for providing the music for our podcast. On behalf of everyone in this episode, we wish you a good week. Don’t forget to subscribe to our channels, Like our pages and follow us on social media. Thank you for listening and we’ll talk to you soon.



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Vache Gabrielyan, Armenia, Armenian Economy, Inflation, Ukraine War, 44-Day War, Russia, Turkey, Normalization, Azerbaijan, Trading Partners, Corridor Economics, Meghri Corridor,