THE ROLE OF TOURISM AS THE FACTOR ENSURING ECONOMIC GROWTH IN THE REPUBLIC OF ARMENIA: CHALLENGES AND PROSPECTS

The tourist arrivals were growing from 2012 to 2019, and 1.8 million people visited Armenia in 2019. That number was not surpassed in subsequent years, and the expenditures by international inbound visitors amounted to about 2.44 billion US dollars in 2022 (accounting for 12.5% of GDP). The article attempts to identify the role of expenditures by international inbound visitors in Armenia in explaining the statistically significant changes in the real gross domestic product (GDP), and the role of tourist arrivals and exchange rate in explaining statistically significant changes in tourism receipts in the short run utilizing the least squares estimation techniques and using quarterly data (2012q1-2023q2); and how vulnerable the Armenian economy is to external shocks to propose respective recommendations on priorities to address the challenges faced under various scenarios we built. We find evidence of the «multiplier effect» with respect to tourism receipts and conclude that the Armenian economy is vulnerable to changes in tourist arrivals (especially visitors from Russia). The slight reduction in tourist arrivals from Russia or if their number remains unchanged could be accompanied by a decrease in expenditures by Russian visitors in Armenia in the period 2024-2026. We conclude that the overvalued Armenian dram against the US dollar in the short run and medium term would negatively affect the price competitiveness of Armenia as an attractive travel destination for foreign visitors unless Armenia succeeds in offering specific tourism products by taking into account the price-perceived quality ratio to attract foreigners. We emphasize the importance of the availability of 2-star hotels or affordable accommodation in the medium term to prevent a drop in tourist arrivals if the Armenian dram remains overvalued.