Why are companies closing in Armenia?

According to official statistics, the number of registered organizations in Armenia has decreased this year—and quite significantly.

In particular, as of August, the number of active organizations amounted to 65,481. In August of last year, 69,661 organizations were operating in Armenia. This means that over 12 months, the number of active organizations decreased by 4,180. In the first eight months of this year, the pace of decline accelerated even further: compared to December 2024, the number of active organizations dropped by 5,079.

At first glance, such a picture seems contradictory amid the reported success of the Armenian economy. After all, favorable economic conditions are reflected in investments in the real sector or, in other words, in the number of organizations and economic entities. But since statistics always come with footnotes, and in line with our principle of presenting an objective picture, let’s outline the changes that shaped this situation.

In August 2024, the number of microenterprises or microbusinesses was 58,481, whereas in August this year their number was 53,612. The number of such organizations decreased by 4,869. The number of large organizations increased. Of course, this is a positive trend. However, there is a caveat. First, the number of small organizations is much larger, meaning the decline affects the biggest segment. Second, it seems that the reduction in the number of microenterprises is only a matter of time. Why do we think so?

Even during discussions of tax changes, we warned that as a result of the changes that came into force this year, the smallest enterprises might not withstand the pressure and simply shut down. The issue concerns changes in taxation, when many organizations had to leave the preferential tax regime and switch to the general taxation system. But aren’t tax changes still ongoing?

Since January this year we have observed only partial changes, while the government’s ultimate goal is to maintain a unified tax field. Precisely for this reason, we are concerned that the situation, where only the number of very small enterprises has decreased, may only be a matter of time.