In its flagship annual economic publication, Asian Development Outlook 2014 (ADO),, the Asian Development Bank (ADB) estimates 4.6% in economic growth for Armenia this year and 5% in 2015.

These figures are less than the estimates published by the Armenian government and trail the expected growth rates of neighboring countries.

This year the Armenian government expects an economic growth rate of 5.2%.

For Azerbaijan, the ADB estimates 2014 growth at 5% and 5.5% for Georgia.

ADB economist Grigor Gurjyan told Hetq that it wasn’t clear whether Armenia’s entry into the Customs Union would have mostly positive or negative short-term effects.

The report notes: While Armenia may benefit in the long run from higher trade in the enlarged market, lower nontariff trade barriers, more efficient flows of labor and capital, and potentially greater FDI, it remains to be seen how terms-of-trade changes will affect trade with countries outside the union.”

A main policy challenge for the Armenian government, the report stresses, is high unemployment.

Here, the report reads:  “Economic growth has had limited impact thus far on Armenia’s high unemployment. Despite some reduction during the past 4 years, the persistently high unemployment rate, estimated at 16.8% in 2013, hinders poverty reduction. A shrinking workforce (caused by outward migration), outmoded worker skills, and market distortions created by a large informal sector continue to undermine Armenia’s growth potential. Addressing these weaknesses would reduce unemployment, narrow income disparities, reduce poverty, and promote more inclusive growth.”

The ADB report also emphasizes the need to reform the overall business climate in Armenia in order to attract more foreign direct investment, which is also critical for boosting employment.

The report pegs 2014 inflation at 4.5% and 4% next year.