Armenia’s IT Sector: From Strategic Priority to Potential Decline
Armenia’s IT sector, once a driving force of economic growth, is now facing significant challenges. Recent data shows that the industry has experienced negative growth in the last two quarters, potentially signaling a crisis in this strategic sector. The boom that began in 2022, largely fueled by an influx of specialists from Russia, has started to wane. While the number of IT companies registered in Armenia has sharply decreased, there’s been a curious increase in foreign-registered IT companies operating in the country. However, this shift doesn’t align with employee numbers, suggesting possible data inaccuracies or a mass closure of small businesses.
Several factors contribute to this downturn, including the appreciation of the Armenian dram, changes in tax policies, and the high cost of living in Yerevan. The strengthening of the dram has particularly hurt export-oriented sectors like IT. Additionally, the phasing out of tax benefits for IT companies and the potential doubling of turnover tax for small and medium enterprises are making neighboring countries like Georgia more attractive for IT businesses. The situation is further complicated by a noticeable capital outflow and reduced inflow. As Armenia approaches a critical juncture for its IT sector, there’s an urgent need to reassess development strategies, consider tax policy revisions, and explore new IT hubs beyond Yerevan to maintain the industry’s competitiveness and growth.
Aghasi Tavadyan
