Economic Monitor Armenia
Robust economic growth of 5% is expected in 2025/2026. The finalisation of the peace agreement with Azerbaijan and the opening of the borders offer considerable upside potential.
WA 14 | October 2025
Overview
- 2024: robust real GDP growth of 5.9% yoy; above potential
- 2025: growth of 5.1% yoy; expansionary fiscal policy supports consumption and investment
- 2026: further slowdown to 4.8% yoy; upside potential: finalisation of peace agreement with AZE, opening of border with TUR; risks: uncertain economic outlook for RUS, deterioration of relations
- Inflation picked up slightly but is still low; with 3.3% yoy in 2025 and 3.0% yoy in 2026, it is expected to remain inside the new CBA target of 3% +/-1pp
- Exchange rate vis-à-vis the US Dollar remains stable; international reserves increased significantly (Aug-25: USD 4.2 bn) after the issuance of the Eurobond in early 2025
- Expansionary fiscal policy: budget deficit widened to 5.5% of GDP in 2025, with a slight decline to 4.5% expected in 2026; public debt will remain above the fiscal rule (50% of GDP)
- Strong decline in exports (8M2025: -49% yoy) and imports (-34% yoy) of merchandise as trade shocks (e.g., “gold rush”) fade out; exports of services declined slightly (6M2025: -6.5% yoy)
Special issues
- Attracting German FDI. Semiconductors and IT identified as most promising sector, with some niches in aerospace, robotics & automation, pharma and tourism
- Cross-border power trade. Stronger regional integration would help to diversify trade partners, as well as improve solar integration and energy security
