While the ruling elite is having carefree fun in the “happy buses” and is in the midst of celebrations, the risks and effects arising from the regional geopolitical situation on Armenia are becoming more and more important.

They are gradually expressed both in the economy and in the consumer markets. Inflationary pressures have intensified, although the Central Bank is not in a hurry to revise the refinancing rate. Not because there is no need for revision at this moment, but because there are so many uncertainties that they prefer to remain neutral for now.

In the last session of the Council, the Central Bank again left the main interest rate unchanged.

The last time it was revised and slightly reduced in December last year. However, after that, phenomena took place in the consumer market, which activated inflation. Inflation risks have worsened especially as a result of the escalation of the conflict in the region, which has created serious threats for Armenia.

According to the estimates of the Central Bank, if these risks are taken into account, the additional impact on inflation may be 1.2-1.7 percentage points. It will be transferred through the increase in prices of energy carriers, logistics problems and the increase in prices resulting from the use of alternative roads, as well as through the substitution of food products imported from Iran.

In the case of implementation, which is already being observed, all this will significantly boost inflation in the domestic market, especially if we take into account that already at the beginning of the year, Armenia entered an environment of inflation activation.

In February, the 12-month inflation was 4.3 percent. 2 months ago it was 3.3 percent.

Inflation intensified especially in food markets, reaching 6.5 percent in February. And this in the event that the processes taking place in the region had not yet started.

It is not difficult to imagine what will happen when all the influences dictated by the processes taking place in the region are added to the existing situation.

In some cases, these effects are already observed, both in the case of food and non-food products, but it will be possible to talk about them in detail later, when the results of the statistical committee’s observations on the developments in consumer markets in March will be published.

Until then, inflation is moving in the direction of activation. It is not difficult to understand what this means for hundreds of thousands of citizens of Armenia, whose incomes are lower than the value of even the minimum food basket. The fact that pensions will increase by 10,000 drams from April 1 will not change anything or almost nothing in the lives of pensioners.

But the problem is not only inflation. The entire economy of Armenia is facing risks.

According to the estimates of the Central Bank, on the one hand, the conflict taking place in the region has the potential to increase inflation, on the other hand, it increases the risks of slowing down the economy, which can be quite an undesirable phenomenon for Armenia.

“If there is a decline in economic activity in the world economy, it will irreversibly affect the economic growth and developments in Armenia,” this is the assessment of the Central Bank president.

The decrease in external demand will undoubtedly weaken the export potential of the economy, which is known to be in the same state as it is. This will be expressed especially by limiting the opportunities to export some Armenian products to a number of countries in the region, due to logistical problems. But it will not happen only in the case of exports of Armenian products. Re-exports will be limited, which have become a lifeline for Armenia’s economic and export growth in recent years under the conditions of the Russian-Ukrainian conflict.

In particular, we are talking about re-exports to the UAE. In the last few years, a large batch of goods was brought to Armenia and exported to that country through Armenia, leaving the impression that our economy is in the midst of rapid development and growth. One of those products is Russian gold, which is known for its significant role in the growth of Armenia’s economy and exports. Only the restriction of re-exports of Russian gold is enough to make the “impressive” growth of the economy and especially the industry disappear.

The risks from the tourism sector have increased. It is difficult to expect active tourist flows when the region is burning in flames.

It should not be forgotten that one of the main tourist destinations of Armenia is Iran. Before the recent events, almost 10 percent of the streams came from that country. This period was especially active.

If forced migration does not take place, it can hardly be expected that there will be tourist visits from Iran to Armenia in the near future. Even after the end of the conflict, it is difficult to cherish serious hopes in this direction.

Very soon we will see the direct consequences of the conflict on tourist flows. Although even before that a certain passivation of interests was observed. In February, although a certain increase was recorded after the fall of the previous year, the “historical record” stopped. Tourist flows were significantly, almost 6 thousand less than in 2024.

The potential risks of reduced flows are now much greater.

Armenia’s economy will also be affected by the price increases of energy carriers, if they are not already there. After a short price reduction, in recent days the prices of energy carriers have increased again, and quite sharply.

In addition to all this, the problem of ensuring the income of the state budget is more than worrying. The deterioration of the economic situation will directly affect the budget revenues. And this is in the event that today’s rulers of Armenia, based on their own political expediency, have made a number of adventurous decisions, endangering the fiscal stability of the country.

HAKOB KOCHARYAN

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