It was symbolic that Prime Minister Nikol Pashinyan’s August 2019 speech on his long term vision for Armenia took place in Stepanakert. The speech set ambitious targets to be achieved by 2050, including a population of 5 million, 1.5 million new jobs, eliminating poverty, and a GDP 15 times greater than today’s figures. Progress towards these goals would greatly impact Armenia’s economic prosperity and long-term sustainability.

This article will focus specifically on the GDP growth target of 1500 percent and examine the likelihood of hitting such a goal by 2050. The population target of 5,000,000 is also related and will thus be considered indirectly.

In order to study the matter at hand, this piece will use two approaches:

A historical analysis to find instances of other countries achieving such targets; A model of such a development scenario to determine what input parameters would be required to hit such goals. That is, which variables (ex. productivity, population growth) are most important to achieve the “2050-15xGDP” target.

Inflation-adjusted Numbers or Not? In local Currency Terms or Hard Currency?

The first order of business is to understand what is meant by 15x GDP growth. It is expected that most currencies will be worth less in 2050 than they are in 2019 due to inflation. It has also been the case that the currencies of developing countries like Armenia tend to register higher levels of inflation than developed economies, slipping in value over time when compared against the US dollar or the Euro. If the target is set in nominal (i.e. not inflation adjusted) AMD terms, reaching the “2050-15xGDP goal” is fully possible but the country would not actually be producing 15 times the value of today’s economic output. It would be more honest to consider the target in real ( inflation adjusted) US Dollars (or Euros), which makes it much more difficult to accomplish.

To compare the two ways of counting, over the 24 years between 1994 and 2018, Armenia’s GDPexpanded by 32 x in nominal AMD terms but only 4.1x in real USD terms.

Obviously, standards of living do not improve through higher inflation rates; similarly, Armenia’s foreign purchases of military equipment, as an example, are not paid in local currency but in US dollars. Real USD terms provide a more useful gauge of Armenia’s performance in relation to its peers and competitors.

The Real Numbers – Have we Seen Such Targets Hit Elsewhere?

For the purpose of a historical, cross-country analysis, real inflation-adjusted US Dollars have been used as a common denomination for all countries studied.

Armenia’s 2018 GDP of 13 billion USD was taken as a starting point, using 2010 constant/real US Dollars, as a base).

To account for both the Artsakh economy and a shadow economy that will begin to be accounted for in official numbers due to anti-corruption initiatives, this 13 billion USD figure is generously adjusted upwards by 25 percent. Fiscal revenues show that progress is already being made in this area so there is room for optimism. We assume that the shadow economy will be reduced from the currently-estimated 36 percent to approximately 15 percent of GDP.Under these assumptions, in order to reach the “2050-15xGDP” objective, the economy would need to grow by 8.1 percent per annum for the next 32 years.

The reader should note that this average number includes both economic booms and recessions, as well as any other domestically- or externally-originated economic headwind. Accordingly, 8.1 percent is quite an ambitious number. For perspective, current global growth runs at approximately 4 percent per annum.

Only five countries have achieved 15x GDP over a 30 year period in modern history:

Equatorial Guinea: 106xGDP, 1982-2012, due to oil/hydrocarbon discoveries;

Botswana: 26xGDP, 1961-1991, due to diamonds and nickel exports;

Oman: 24xGDP, 1965-1995, due to oil/hydrocarbon export reliance;

China: 19xGDP, 1981-2011, due to diversified economic restructuring;

South Korea: 16xGDP, 1962-1992, due to diversified economic restructuring.

Significant progress has also been made in other jurisdictions, but the examples above show how rare a 15x expansion is, especially when it is not dependent on mineral discoveries.