Armenia’s economy grew by 6.4% year-on-year in the second quarter of 2024, surpassing its potential and exceeding the long-term sustainable growth estimate of 5%, according to the Central Bank of Armenia and Governor Martin Galstyan.
“We believe this gap is narrowing over time, but we are still in positive territory relative to potential,” Galstyan said during a press conference on Tuesday. He added that some short-term factors continue to influence economic growth, raising uncertainty about its long-term stability. Specifically, the re-export of Russian gold and precious stones has contributed to significant short-term growth but adds to the uncertainty surrounding future stability.
The 2024 state budget projects economic growth of 7%, while the Central Bank forecasts a growth range of 6.1% to 6.8% for the year. Preliminary official statistics show Armenia’s GDP for Q2 2024 increased by 6.4%, reaching approximately 2.3 trillion drams.
Revised Growth Figures and Economic Drivers
In late August, the National Statistical Committee revised Armenia’s 2023 economic growth figures, reducing the annual growth rate by 0.4 percentage points to 8.3%. According to updated data, Armenia’s GDP for 2023 amounted to 9.45 trillion drams (approximately $24.3 billion), which is 52 billion drams ($133 million) less than the initial estimate. The GDP volume index dropped by 0.4 percentage points, now standing at 108.3%.
The figures for the first quarter of 2024 were also adjusted. GDP for this period decreased by 48.3 billion drams (over $124 million), to 1.922 trillion drams (more than $4.9 billion). The volume index declined by 2.6 percentage points, now at 106.6%.
Despite these revisions, the economy continues to grow, driven primarily by sectors such as construction, trade, and financial services. However, the Central Bank highlighted risks and uncertainties tied to a reassessment of the added value in the manufacturing sector, which had led to the downward revisions.
Challenges in External and Domestic Demand
The Central Bank also noted a gradual decline in external demand, which has been observed since 2022. This is reflected in a decrease in real spending per tourist, stabilization in tourist flows, and a continued decline in exports, particularly in IT services. The outflow of highly qualified foreign specialists has also contributed to this trend.
On the domestic front, trends are mixed. High growth rates in retail trade, consumer lending, and domestic tourism indicate strong internal demand. However, challenges such as a reduction in remittances and weakening labor market conditions suggest that domestic demand may not be as robust as these figures suggest.
Additionally, concerns have been raised about the impact of private sector debt burdens, slowing wage growth, and the use of accumulated savings, which may influence future domestic demand.
Fiscal Policy Risks
The Central Bank also warned of potential risks associated with additional demand stimulation through fiscal policy. These risks include potential underperformance in tax revenues and increased government spending on social programs, which could further strain the economy. Despite these concerns, Armenia’s economy remains on a positive trajectory, with growth figures for the second quarter exceeding expectations and potential.
