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Following a faster-than-expected recovery in H1, the projected GDP growth rate for Armenia in 2021 has been revised to 6.1 percent, up from 3.4 percent in April 2021, according to the World Bank's Economic Update for the region.  

"Due to the twin shocks of the pandemic and the conflict with Azerbaijan, Armenia’s economy contracted sharply in 2020, which inflicted a significant welfare loss. The economic recovery in 2021 has been faster than anticipated, and the economy is likely to return to pre-COVID output levels by mid-2022. The slow pace of vaccinations, rising COVID-19 cases, and geopolitical fragility present important risks to the outlook," the source said. 

Private consumption will continue to drive the recovery as rising employment rates, wage levels, and remittance inflows bolster household incomes. Private investment growth is expected to accelerate, while fiscal consolidation may slow the growth of public investment. The government’s medium-term expenditure framework anticipates a narrowing of the deficit from 5.1 percent of GDP in 2020 to around 2 percent in 2023, contributing to a decline in the public debt-to-GDP ratio from 67.4 percent at end-2020 to 63.4 percentn 2023. 

"While output is projected to rebound rapidly, the more gradual recovery of the labor market will attenuate the impact of renewed growth on poverty and inequality."Increased generosity of support measures and improved program targeting could help minimize the long-term impact of the economic shocks of 2020 on economic opportunity, household vulnerability, and gender parity," the Outlook said. 

The average inflation rate is forecast to remain above the CBA’s target band in 2021, but it should converge with the 4 percent target in the medium term as monetary policy anchors inflationary expectations. Elevated inflation rates will adversely affect distributional equity and household welfare.