Economic activity index of Armenia

“Armenia’s economic growth potential is not infinite, the current indicators will gradually slow down. But as long as inflows remain, we will see high rates,” economist Narek Karapetyan says on the latest data published by the Armenian Statistical Committee. According to the analysis of indicators for January-May 2023, the country’s economic activity index rose by 12.5% compared to the same period last year.

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Compared with the first 5 months of the previous year, the volume of foreign trade increased by 86.9%, exports increased by 93.3%, imports by 83.3%.

“The growth in trade turnover in January-May compared to January-May 2022 amounted to 24.5%. Over the same period, the volume of services provided increased by 19.9%,” the statistical committee reports.

The volume of construction work increased by 16.7%, and industrial output by only 3%.

Expert at the Amberd Analytical Center, economist Narek Karapetyan believes that “the economic developments in January-May 2023 continue the trends of the second half of the previous year.”

He believes that 80% of export growth is accounted for by re-export and explains that it is possible to understand by the types of products whether we are dealing with export or re-export. According to Karapetyan, Armenia does not produce enough electrical equipment to export. Therefore, in this case, we are definitely talking about re-export.

As for “traditional” exports, the economist said they were “hard hit” by the exchange rate.

According to him, high levels of trade turnover were also affected by re-export.

“There is a second factor: the influx of both capital and people continues, although not as rapidly as before. These trends also determine the continuity of growth,” the expert says.

He notes that certain changes are observed in the structure of economic growth:

“They are neither positive nor negative, they just do not lead to the economic model of our dreams and create prerequisites for less sustainable economy. A service-based economy is less resilient to external shocks and changes in external demand.”

Reminds that Armenia has a small economy, and the country has limited domestic demand. The Economist emphasizes that in such cases, for development, “the emphasis is on exports.” And Armenia, according to him, continues to move within the framework of the general trend of growth of services that are subject to domestic consumption:

“We all would like to see an economy in which sectors producing competitive products that could be exported have more weight. First of all, we are talking about the manufacturing industry. The growth of this sector of the economy could determine the movement towards the model that we imagine.”

The expert is sure that it is the development of the export direction

• strengthens the foundations of the economy,
• positions the economy in global economic chains,
• creates the basis for more stable and long-term growth.

Karapetyan believes that the state, which owns the tools of economic policy, can direct the available resources to create “the desired economic structure and dynamics.”

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