Opinion: What’s behind Armenia’s economic growth figures?
What’s behind Armenia’s growth?
Economy Minister Gevorg Papoyan shared figures on Facebook that present Armenia’s economy as a success story. He said that, according to the IMF, Armenia ranked among the world’s top 20 countries by growth in 2025, outperforming all European states except Ireland.
He also highlighted growth in exports to the EU, the United States and China. In particular, he cited export figures to the EU for the first quarter of 2026 compared with the same period last year. According to his post, exports rose by 90%.
What lies behind these encouraging figures? What drove this growth, and how sustainable is it? Economist Suren Parsyan commented on the situation.
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Comment by economist Suren Parsyan
Growth driven by anti-Russia sanctions
“Since 2022, the Russian factor has become one of the key drivers of Armenia’s economy. After Western sanctions came into force, part of Russia’s financial and trade flows shifted through Armenia. This shift fundamentally reshaped the local economy.
The clearest example is the sharp rise in electronics re-exports. Companies that import electrical goods from third countries and then ship them to Russia have quickly moved into the country’s top five taxpayers.
At the same time, Russia uses Armenia as a transit corridor to export gold and diamonds, mainly to the UAE. By some estimates, these operations reached nearly $5bn in 2022–2023 alone. These flows distort Armenia’s foreign trade statistics and create the impression of organic export growth.
Armenia’s banking system has also become a key tool for Russian businesses and individuals. They use local banks to carry out international transactions and bypass restrictions.
Taken together, these factors have driven strong macroeconomic performance in Armenia. However, this growth reflects short-term conditions rather than structural change.”
Growth on credit
“Economic growth continued in 2025 on the same basis. Another factor also came into play — the construction sector. State-funded projects drove it, including the construction of roads, schools and kindergartens.
Over the past five years, the government has increased external debt by about $1bn a year. It has used borrowed funds to boost consumption — raising pensions and benefits, and financing infrastructure projects. As a result, the economy has grown at an average rate of around 7% in recent years, one of the strongest performances in the region.
However, these figures raise serious questions about the quality and sustainability of this growth.
Public debt is its direct cost. The problem is that the economy has not grown on the basis of factors that can generate future income to service that debt. Most of the money has gone into consumption. The distinction is fundamental. It is one thing to take out a loan to buy a phone, and another to invest in machinery that produces phones. Armenia has chosen the former path, and this will inevitably lead to negative consequences.”
Polarisation within the economy
“Another key question is who has actually benefited from this growth. The main beneficiaries have been the banking sector, which services export-import operations, wholesale traders involved in re-exports, and construction companies.
Poverty figures speak for themselves. Over the past five years, the rate has fallen by just 4–5 percentage points and now stands at 21%. In other words, one in five people in the country remains poor. Economic growth has largely bypassed most citizens.
At the same time, polarisation within the economy has increased. Small and medium-sized businesses account for about 20% of GDP. This is half the government’s target of 40%. The economy is becoming increasingly concentrated in the hands of large players, while small businesses struggle to compete.”
Dutch disease, Armenian-style
“Behind the façade of growth lies another problem: the decline of the manufacturing and processing sectors. While re-exports and transit boomed, local production — alcoholic beverages, meat and dairy products, and other goods — either stagnated or declined.
The risks are clear. If the geopolitical environment shifts and Russia finds alternative routes to bypass sanctions, Armenia’s transit channels will close. The dram, propped up by the central bank, would fall sharply. Imports would become more expensive overnight. Inflation would follow, and sectors dependent on transit flows would face a sharp downturn.
There are already precedents. After 2022, the arrival of around 100,000 Russian relocants triggered a boom in services — restaurants and hospitality. When they left, these sectors declined just as sharply, and jobs were lost. A similar pattern played out in IT. Russian companies drove growth of 40–50%, but their departure led to a contraction of about 20%.
Warning signs are already emerging. Exports have fallen by around 30%, a direct result of declining trade with Russia. In particular, Russia has begun exporting gold directly. After the export tax was scrapped, the need for Armenian transit disappeared.
At the same time, strategically important sectors remain weak. Agriculture accounts for just 7–8% of GDP and shows little sign of development. Livestock farming is not profitable — beef costs about 5,000 drams per kilogram (around $13.5), largely because domestic production is limited.
In economic theory, this is known as “Dutch disease” — a reference to the Netherlands in the 1970s, where an oil and gas boom coincided with the decline of other sectors.
The solution lies in effective redistribution: using revenues from fast-growing sectors to support those that lag behind. But this is not happening. Some sectors are expanding rapidly, others are deteriorating, and the gap between them continues to widen.”
Symbolic indicators
Economy Minister Gevorg Papoyan wrote on his Facebook page:
“In January–March 2026, compared with the same period in 2025, exports
- to the European Union rose by 90%,
- to the United States by 13%,
- and to China by 2.3 times.”
“Exports to Western markets remain largely symbolic. Armenia sold about $50m worth of goods to the United States — alcohol, canned products and a small volume of diamonds. A 13% increase in exports to the US does not change the overall picture in absolute terms.
As for Europe, exports have declined sharply since 2018. While EU countries accounted for 12–13% of total trade in 2018, they now make up just 7–8%. Last year, trade with the EU stood at around $100m. In the first quarter, it rose from roughly $30m then to about $45m now.
The rise in exports to China reflects commodity market conditions rather than economic diversification. Armenian mining companies have benefited from higher global prices for copper and molybdenum. Copper, in particular, has reached about $12,000 per tonne.
Trade with Russia, by contrast, is declining. Both exports and imports fell last year.”
Policy needs a reset
“Armenia’s current economic growth largely reflects external factors, and the role of the current authorities in driving it has been limited. To secure sustainable long-term growth, the country needs to revise its economic and social policies. This has not happened for several reasons, including pre-election considerations, a lack of managerial experience, and weak infrastructure.
There is also a historical precedent. In 2008, Armenia recorded strong growth driven by a construction boom. When investment in the sector dried up, the economy contracted by 14.4%. The current model follows a similar pattern. To avoid another sharp downturn, the country needs new large-scale domestic projects. These could include the planned launch of a major AI facility and joint ventures with Western companies capable of delivering organic growth.
For now, however, the authorities are focusing elsewhere. They plan to launch gold extraction and processing at the Amulsar deposit in June.”
What’s behind Armenia’s growth?
