WB: Dangerous trends are emerging in Armenia’s economy

The World Bank’s July report on Armenia’s economy warns of dangerous trends already emerging.

Economic activity increased by 11.7% in May 2026, and by 8% in January-May. However, during the same period, exports decreased by 3.7%, imports increased by 2.2%, and the trade deficit reached around 7% of the projected annual GDP. Exports to Russia were reduced by 15% in May alone.

Inflation reached 5.1% in June, and food inflation reached 8.6%. Even the seemingly positive 0.8% surplus in the budget was formed amid a 54.5% reduction in capital expenditures and a freeze in defense spending.

The World Bank separately emphasizes the risks arising from political developments with Russia.

40% of tourists and 61% of net remittances in May are from Russia. They strengthened the dram, increased bank liquidity and supported domestic demand. In other words, dependence on Russia is no longer only a matter of foreign trade. It simultaneously refers to exports, transfers, tourism, domestic consumption, exchange rate and energy security.

In May-June, Russia restricted the entry of Armenian agricultural products, flowers, fish products, mineral water and alcoholic beverages into its market.

The World Bank is already warning that if these restrictions are maintained or expanded, their consequences will go beyond foreign trade and will affect economic growth, prices and social conditions.

And what does the Armenian government oppose to this danger? State compensation for transport and customs costs and optimistic statements about the rapid redirection of exports to the EU market.

Although the assistance of the European Union is politically important, it is limited in economic scope, and based on it, the government’s expectation to replace the Russian market with the European one in a short period of time is absurd.

The European market is not only the elimination of customs duties. It requires compliance with other quality and safety standards, certification, traceability, expensive logistics, stable supplies, distribution networks, new packaging, marketing and business relationships built over years. Especially fresh agricultural products, flowers or fish products cannot be transferred to another market in one day by the decision of the government or the statement of a European official.

The goods exempted from customs duty are not yet sold goods.

But the most painful side of the problem is different. The government consistently brought political relations with Russia to a confrontation, but left the economy in a multi-layered dependence on the same Russia. It did not build economic safety bags, did not prepare the manufacturer, did not create realistic alternatives.

The greenhouse owner, the farmer, the fish breeder, the winemaker, the exporter, the consumer and the tax payer will have to pay the price of that apathy. The latter is also due to the fact that the government will now try to cover the consequences of the work it did not perform with compensation from the state budget.

Russia has turned Armenia’s economic dependence into a tool of political coercion, and the Armenian government, unable to either manage and weaken this dependence, or create a realistic alternative to it, has transferred the entire price of its geopolitical improvisation to the economy and citizens of Armenia.

Davit Ananyan, former chairman of the RA SRC

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