According to the World Bank’s monthly review of Armenia’s economic development, a slowdown in growth rates was recorded in August 2025, though overall stability was maintained, surpassing analysts’ expectations. The World Bank review paints a multifaceted picture—from declining growth rates to the recovery of remittance volumes and a moderate rise in inflation. This analytical article examines key indicators, their causes, and potential consequences.
Slowdown in Growth Rates: 7.5% in August and 7.1% Overall
The economic activity index grew by 7.5% year-on-year in August, down from 9% in July. The slowdown was observed across nearly all sectors, except for industry and retail trade. Industrial production increased by 5.8%, primarily driven by the processing sector (7.3%), where the production of base metals played a key role. Construction slowed to 21.1% (compared to 26.1% in July), while the services sector grew by 6.7%.
The cumulative growth for the first eight months reached 7.1%, exceeding forecasts and demonstrating the economy’s resilience despite external risks, including the repercussions of the Russia-Ukraine conflict. However, this slowdown may signal weakening external demand or domestic consumption. Experts note that if this trend persists, GDP growth for 2025 could decline to 6–7%, a drop from the double-digit figures of previous years.
Labor Market and Business: Improvements, But Challenges Remain
Economic growth has had a positive impact on the labor market. The unemployment rate in the second quarter of 2025 fell to 12.3% (down from 13.8% the previous year), mainly among men and the urban population. Employment reached 51.2%, and labor force participation stood at 58.3%, indicating the economy’s ability to create jobs.
However, the registration of legal entities in August decreased by 3.5% compared to the previous month, largely due to a decline in the number of individual entrepreneurs and limited liability companies. This trend reflects uncertainty in the business environment, driven by global economic instability. Analysts recommend that the government stimulate the development of small and medium-sized enterprises through tax incentives and preferential loans to sustain growth momentum.
Remittances and External Trade: Russia’s Role and a Pause in Re-exports
The volume of net non-commercial remittances in August rose by 29.1%, primarily due to inflows from Russia (62.7%) and the United States (9.7%). Russia accounts for 64% of total remittances, highlighting Armenia’s dependence on the Russian market. This recovery is favorable for domestic consumption and investment but remains risky amid ongoing sanctions against Russia.
External trade shows a mixed picture. Exports declined by 40.8%, and imports by 28.3%, mainly due to a pause in the re-export of precious stones and metals (a 77% drop). Excluding this factor, exports fell by only 6.1%. Positive signals include growth in the export of processed food products (18.4%) and machinery (5.3%). Tourism increased by 11.1%, partially offsetting the decline in trade activity. These figures suggest that Armenia needs to diversify its exports, reducing reliance on re-exports and developing high-value-added goods production.
Inflation, Monetary Policy, and Budget: Stability with a Cautious Approach
In September, inflation rose to 3.7% (up from 3.6% in August), driven mainly by rising food prices (5.8%), healthcare services (3.5%), and transportation (4.1%). The Central Bank of Armenia maintained the refinancing rate at 6.75% but announced plans to gradually reduce it to 6.25% over the next 12 months. This reflects confidence in inflation control while exercising caution amid global risks.
In the budgetary sphere, a deficit of 0.55% of GDP was recorded from January to August, significantly below the planned 5.5%. Tax revenues grew by 10.9% (VAT up 21%, profit tax up 35.3%), while expenditures decreased by 3%, primarily due to a reduction in capital spending (-24.3%). Education spending doubled, a positive sign for long-term development. This stability provides the government with room to maneuver, though the low deficit level may indicate deferred investments.
In the banking sector, loans and deposits grew by 1.9% month-on-month and by 27.2% and 15.8% year-on-year, respectively, signaling confidence in the financial system. However, rising inflation could pose risks.
Prospects and Challenges
Armenia’s economy in 2025 demonstrates resilience, but the slowdown in growth rates and external dependence (on Russia and re-exports) present challenges. Positive factors include improvements in the labor market, tourism recovery, and budgetary stability.
Moving forward, a key task will be diversifying the economy through investments in technology and green energy, which could reduce vulnerability to external shocks. As World Bank experts note, Armenia’s indicators exceed expectations but require cautious economic policies. The country, in their view, can leverage this period to become a regional example of resilience and balanced development.