In a five-year policy program approved by it on Thursday, the government forecasts slower economic growth in Armenia. It says the Armenian economy will grow by an average of 6 percent annually between now and 2031.
The government’s previous action plan adopted in 2021 called for an annual growth rate of 7 percent. This target has been essentially met thanks to positive knock-on effects of Western sanctions against Russia. Armenian entrepreneurs have taken advantage of the sanctions imposed after the 2022 Russian invasion of Ukraine by re-exporting many Western-manufactured goods to Russia.
The robust growth driven by services and construction has clearly not led to the kind of structural changes in the domestic economy that were promised by the government. In particular, it pledged to increase the share of manufacturing in the country’s GDP from 11 percent to 15 percent by 2026. The ratio has remained unchanged as of last year.
The 2021 program also committed Prime Minister Nikol Pashinian’s government to reducing the official poverty rate by half, to 14 percent. Around 22 percent of Armenians currently live below the official poverty line. The new program says that the figure should fall by only 5 percentage points over the next five years.
The government had also pledged to cut the unemployment rate from 15 percent to below 10 percent. It now stands at 13.7 percent, according to government data. The government now promises to help create 125,000 new jobs by 2031.
GDP growth, which accelerated to 7.2 percent in 2025, continued largely unabated into the first half of this year. It remains to be seen how it will be affected by Russian bans on imports of Armenian agricultural production, flowers and mineral water imposed in late May and early June.
Moscow has threatened to take other punitive measures such as a sharp rise in the price of Russian natural gas supplied to Armenia and curbs on Russian tourists visiting the country. It is pressuring Pashinian’s administration to quickly decide between seeking to join the European Union and remaining part of a Russian-led trade bloc essential for the Armenian economy.
Pashinian and other Armenian officials have downplayed the Russian sanctions’ impact on the economy. By contrast, the World Bank cautioned last month that possible consequences of the embargo “could spill beyond trade and affect growth, prices and social conditions.”