In 2020, an economic decline of 7.4% was registered in Armenia, mainly due to a 9.2% decline in services and a 6.6% decline in construction. The external shocks have, of course, posed great challenges in the financial system as well. Credit risk growth and eligibility pressures have arisen.
The past 2021 was more than challenging for Armenia, for sure. Like almost all sectors of the economy, the construction in Armenia has suffered significant losses during 2020 because of COVID 19 lockdown, then war․
According to the Statistical Committee, compared to the first five months of last year, construction volumes decreased by 6.6%.
For the last ten years, the construction sector in Armenia has been in decline, and in 2009 that decline was sharp due to the global economic crisis. Until 2018, this downward trend maintained, however in 2018-2019, the sector finally started to grow.
Historical Review of the development industry in Armenia
The 5 years before the global economic crisis were years of unprecedented growth for the Armenian construction sector. In 2005, the annual growth of the sector was about 40% and became a key player metric for the economy.
According to the specialists, the reason for such growth was an unprecedented increase in the volume of housing construction, the growth of remittances from abroad, and private investments.
Later, the same specialists called this phenomenon a “construction bubble”, and the former authorities were accused of ensuring economic growth due to disproportionate construction growth. According to many economists, it was very dangerous to cause such growth of the non-exportable part of the economy and inadequate overvaluation of the Armenian national currency dram (AMD). The worst nightmare of economists was not groundless and in 2009, the construction sector experienced a sharp decline (construction volumes fell by 37.4% at once), proving the worst forecasts of experts.
The decade of declines was a heavy blow for the industry, it did not come to its senses until 2017.
The volume of construction works provided from the state budget in 2019 increased by 8.9% as compared to the previous year, the volume of works carried out by private organizations – by 1.4%, and the construction works carried out by the population – by 6.1 by%. In 2019, it was obvious that the Republic of Armenia was on the verge of a new construction boom.