Economic Growth of the Republic of Armenia versus Caucasus region during the Period 2017– 2019: A Case Study

Abstract

The economic development of the Transcaucasian countries of Armenia, Georgia, and Azerbaijan has been determined by a multitude of regional as well as international factors since their independence from the USSR in the early 1990s. Historically, Georgia and Azerbaijan constantly outperformed Armenia in terms of annual nominal GDP growth. This study concentrates on the period 2017–2019 when the reverse process was registered. Nahapetyan (2020) correlated this phenomenon of increased relative growth in Armenia with the Velvet Revolution that took place in 2018, resulting in the displacement of the former government notorious for their levels of corruption. I use data from the World Bank Open Data website and the Statistical Yearbooks of respective countries to conduct a difference-in-differences regression analysis on the change between 2017–2019 and 2010–2016 average growth rates of these countries. Sectoral-level data is utilized to conduct a similar difference-in-differences comparison to reinforce the conclusions reached from examining overall changes in average GDP growth rates between the countries. Contrary to the conclusions reached in previous studies, the higher-than-usual economic growth rates of Armenia in 2017–2019 are largely attributable to the combination of the economic recovery of Russia from its economic crisis in 2014–2017 and the high energy dependence of Armenia on Russia. My findings indicate a clear relationship between the growth rates of the Russian and Armenian economies in 2017–2019 and the one immediately preceding it, which coincided with the Russian Economic Crisis of 2014–2017.