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Armenia’s economy is set to start recovering in 2021 from the impact of the COVID-19 pandemic and the military hostilities in late 2020, the International Monetary Fund (IMF) said in a statement, concluding  the virtual staff-level discussions with the Armenian authorities during April 6–21. 

“The Armenian economy has been severely affected by the COVID-19 pandemic and military hostilities. GDP dropped by 7.6 percent in 2020 reflecting the decline in services and trade. Annual inflation accelerated to 5.8 percent in March 2021 amid recent global food inflation and dram depreciation. The fiscal deficit widened to around 5½ percent of GDP in 2020, reflecting the impact of government support to vulnerable firms and households and higher health spending, with government debt ending 2020 at about 63½ percent of GDP. The current account deficit narrowed to 3.1 percent of GDP in 2020 and gross reserves, albeit somewhat reduced, remain adequate," IMF representative Nathan Porter said. 

According to the statement, the recovery is likely to be protracted. "While there is uncertainty about the pace of the recovery, our conservative outlook expects growth of around 1 percent in 2021 and 3½ percent in 2022. Inflation is projected to peak in the first half of 2021 before declining to around 4 percent by year-end as the temporary impact of imported food inflation and the pass-through from recent depreciation dissipate. The current account deficit would widen to around 5 percent of GDP in 2021 as activity and imports gradually recover. Reserves are expected to remain adequate, supported by the Eurobond issuance earlier this year." 

Among immediate policy priories IMF indicates protecting vulnerable households (including displaced Nagorno-Karabakh residents), accelerating planned capital expenditure, and fast-track large-scale vaccinations to support economic recovery.