A significant share of the increase in the measured value of Armenia’s economy in recent years has been driven by appreciation of the national currency, rising prices and an inflow of people and funds, rather than increased production alone. Former Armenian deputy prime minister Vache Gabrielyan said that high foreign trade turnover does not necessarily mean a comparable increase in value added within Armenia’s economy.
According to him, Armenia’s foreign trade turnover is large, but the value added associated with it is relatively small.
“If foreign trade turnover declines in 2026 while value added rises, that will mean foreign trade flows have little connection with the output created in Armenia’s economy. They mainly serve certain flows associated with re-exports or other purposes,” Gabrielyan said.
Dram appreciation and higher prices affect the economy’s measured value
In his assessment, a significant share of the growth in the nominal value of Armenia’s economy in recent years reflects revaluation. If its size has risen from approximately $14 billion to $30 billion, a substantial part of that increase is linked to appreciation of the national currency and higher prices, rather than growth in the volume of production alone.
Gabrielyan stressed that this does not mean there has been no real economic growth. The question is how much of the overall increase reflects real economic development and how much reflects a change in value.
He also pointed to a changed picture in Armenia’s economic statistics since 2022. According to him, larger inflows of people and financial resources into Armenia have had a significant impact on economic growth during this period.
The former deputy prime minister believes that a decline in these inflows for economic reasons would not necessarily deal a major blow to the economy.
“As a rule, when processes follow economic logic, these inflows do not stop all at once. They diminish gradually. If that happens over a period of time, the economy has some opportunity to adapt to the new conditions, while naturally incurring some losses,” he said.
However, the situation could be quite different if the flows stopped because of political decisions rather than economic factors.
“If it is decided, for example, that tourists from Russia no longer come to Armenia or that certain goods no longer pass through Armenian territory, the inflow of money stops abruptly,” Gabrielyan said. In that case, the impact on the economy would be greater.
Russian market restrictions pose risks to agriculture
Discussing the economic effects of political decisions, Gabrielyan addressed Russia’s restrictions on Armenian agricultural products. According to him, agriculture has declined despite Armenia’s overall economic growth, and that trend could continue.
Banks, the government and the Central Bank have taken steps to temporarily freeze loan penalties and fines for companies facing problems in the Russian market, including greenhouse businesses. Gabrielyan said this is only a temporary solution: the issue cannot remain frozen indefinitely.
In his assessment, the affected part of the economy should be subsidised if necessary. Otherwise, the problem will simply move from one sector to another.
“This is very dangerous for banks. If banks develop problems, the effects will no longer be limited to one particular sector. They will spread through the entire economy, because banks serve every part of it,” he said.
According to Gabrielyan, the temporary arrangement currently in place will soon expire.
“If I remember correctly, the deadline is in 2027. After that, developments will depend on whether the companies can continue exporting,” he said.
👉 Economy