Inflation continues to accelerate. “LUYS” Foundation

“LUYS” Foundation analyzed the socio-economic developments of the RA economy in 2026. in January-March.

Thus.

• 2026 in the first quarter, the growth of economic activity remained at a relatively high level, but the monthly dynamics show a gradual slowing down of the growth rate. In March, the growth of TAC was 6.6%, compared to 7.2% in February, as a result of which the cumulative growth of January-March decreased to 7.1%, compared to 7.4% in January-February. The slowdown is mainly due to the low growth of trade and the sharp decrease in the growth rate of industry. This indicates that although economic activity continues to grow, its current dynamics need a more cautious assessment.
• The growth of industry and exports continues to be volatile and significantly conditioned by temporary factors. After a sharp acceleration in February, industrial growth slowed significantly in March, falling from 23.8% to 7.0%, and in the case of exports, the 40.5% growth recorded in February was followed by a 12.6% decline in March. This dynamic confirms the assessment we mentioned in previous months: the high growths of industry and foreign trade are not the result of expansion of sustainable production or export potential, they are largely due to temporary factors, including the re-export of individual product groups.
• Inflation continues to accelerate. 2026 12-month inflation was 4.5% in March, compared to 4.3% in February, continuing the accelerating trend and being above the upper bound of the inflation target range. This means that, amid high economic activity, demand-side price pressures continue to persist, but there are also supply-side pressures due to regional tensions and possible supply issues arising from them. Under these conditions, the conditions of the monetary policy have not been tightened yet, the refinancing rate has remained at the level of 6.5%.
• In the fiscal sector, against the background of revenue growth and plan overperformance, the continued underperformance of capital expenditures is particularly problematic. 2026 in the first quarter, the total revenues of the state budget exceeded the plan by 36.8 billion drams or 5.8%, while the total expenditures were underachieved by 234.3 billion drams or 28.0%. The capital expenditure situation is more worrying. They fell short of the plan by 131.4 billion drams or 75.5%, and compared to the same period last year, they decreased by 43.4%. Underperformance at such a level of capital spending is problematic not only in terms of short-term demand, but also in terms of increasing long-term economic potential. It also shows that the government’s institutional capacity to plan, prepare and implement capital programs is insufficient, with the result that capital expenditure continues to underperform its potential role in enhancing the quality and potential of economic growth.

The full analysis is available with the following link.

 “LUYS” Foundation

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