Armenia The Second Systematic Country Diagnostic Beyond Boundaries: Unlocking Potential for a Sustainable Tomorrow 2023 Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized i Contents Executive Summary ....................................................................................................2 A rapidly changing context .......................................................................................................................................... 2 Key challenges to inclusive and sustainable growth .................................................................................................. 3 Leveraging opportunities ............................................................................................................................................. 5 1. Introduction ............................................................................................................7 2. Background: Sociopolitical Events and Key Reforms since 2017 ......................... 10 3. Trends in Growth, Poverty, and Shared Prosperity .............................................. 12 3.1. Growth Trends .................................................................................................................... 12 3.2. Poverty Trends .................................................................................................................... 16 3.3. Equity Trends ...................................................................................................................... 18 4. Drivers of Growth and Poverty Reduction ........................................................... 19 4.1. Drivers of Growth ............................................................................................................... 20 4.2. Drivers of Poverty Reduction .............................................................................................. 28 5. Key Challenges to Resilient, Sustainable, and Inclusive Growth .......................... 34 5.1. Vulnerability to Shocks and Environmental Risks ............................................................... 35 5.1.1. Fragility and the Risks of Conflict .................................................................................................................... 35 5.1.2. Vulnerability to Economic Shocks ................................................................................................................... 37 5.1.3. Climate Change, Environmental Risks, and Natural Hazards ........................................................................ 40 5.1.4. Risk Differentiation .......................................................................................................................................... 43 5.1.5. Vulnerable Populations and Building Resilience ............................................................................................ 43 5.1.6. Governance and Institutional Bottlenecks – A Related Example in the Water Sector ................................ 45 5.1.7. Binding Constraints ...........................
