By Christopher Crowson
Despite the country boasting a thriving entrepreneurial sector, four out of five new entrepreneurs in Armenia claim to have started their businesses due to a lack of job opportunities in the labor market.
The 2024 Global Entrepreneurship Monitor (GEM) report ranked Armenia 13th out of 51 countries based on the number of adults starting or running new businesses and 15th out of 51 countries for new entrepreneurs citing job scarcity as the reason behind starting their businesses.
The Global Entrepreneurship Monitor is a consortium of national country teams which conducts research on entrepreneurial activity from around the world. It collects data directly from individual entrepreneurs and provides a comprehensive analysis on the characteristics, motivations and ambitions of people who are starting businesses.
“The economy is not growing enough to create new jobs,” pointed out Sevak Hovhannisyan, expert and partner at the Civitta Foundation, a management consultancy. As a result, many Armenians are taking the initiative and engaging in entrepreneurial activity themselves.
The report categorizes Armenia as a group C country, meaning a lower income economy with a GDP per capita of less than $25,000. Nonetheless, 17.6% of its adult population (aged 18-64) are actively engaged in starting or running a new business.
Although 17.6% is an average figure when compared to other group C economies, it is a relatively high percentage when compared to most other countries from group B (middle income economies) and group A (high income economies).
This reflects a trend which has been demonstrated in the report: entrepreneurial activity tends to be higher in lower income economies.
The relationship between the percentage of adults starting or running a new business (TEA) and an economy’s Gross Domestic Product (GDP) per capita. (PHOTO: Global Entrepreneurship Report 2024)
Hovhannisyan’s first explanation for why Armenia demonstrates dynamism in business creation was more general and applicable to most low-income countries. “There are less opportunities for stable, high paid jobs in such economies, so people try to fill this gap through entrepreneurial activity.”
This aligns with the GEM report, which found that the primary motivation for Armenians starting a business in 2024 was “to earn a living because jobs are scarce.” Nearly 80% of respondents cited this as their main reason for entrepreneurship.
With an unemployment rate of around 13%, Armenians are trying to carve out their own path in the labour market through the creation of their own businesses.
The graph illustrates the percentage of early-stage entrepreneurs (y-axis) across different countries (x-axis) that cite earning a living due to scarce job opportunities versus building great wealth or high income as their primary motivation for starting a business. Countries are grouped based on economic and entrepreneurial conditions.(PHOTO: Global Entrepreneurship Report 2024)
On top of this, Hovhannisyan told CivilNet that “the economy is not growing enough to create new jobs… Armenia needs a growth rate of at least 7% annually to be able to significantly decrease the unemployment rate in the country.”
This figure comes from the 2019 National Competitiveness Report of Armenia, which he co-authored and which estimates that such a growth rate will create over half a million new jobs by 2030.
In 2024, however, Armenia’s GDP increased by 5.9%, meaning that although economic growth is strong, the country continues to lag behind in addressing its unemployment issue.
The GEM report also measured to what extent respondents agreed to the statement “to make a difference in the world”. This motivation certainly did not resonate with Armenian entrepreneurs with only 20% of them agreeing that this was an important motivation for starting their business.
The graph illustrates the percentage of early-stage entrepreneurs (y-axis) across different countries (x-axis) that cite making a difference in the world versus continuing a family tradition as their primary motivation for starting a business. Countries are grouped based on economic and entrepreneurial conditions. (PHOTO: Global Entrepreneurship Report 2024)
It is important to note here that participants could agree or disagree with multiple motivations present in the GEM report. Nevertheless, respondents from only two other countries, Poland and South Korea, agreed less to this statement.
Hovhannisyan explained this phenomenon in connection with the first point that Armenians primarily engage in entrepreneurial activity as a means to increase personal wealth and combat job scarcity rather than to revolutionise the world.
He added that it would be beneficial for the Armenian market if more people were motivated by this reason, “we need more of these people who are not only thinking about making a big profit but about creating something which will solve or satisfy the needs of humanity rather than just a local, self-need.”
The post Armenia ranks 13th in global entrepreneurship as job scarcity drives startups appeared first on CIVILNET.