The sharp appreciation of the Armenian dram since 2022 poses significant risks to Armenia’s exporters, IT sector, and tourism industry, according to Armenian economist and founder of the analytical platform tvyal.com, Aghasi Tavadyan.
Tavadyan asserts that the Armenian dram has become the most strengthened convertible currency globally, a development that could negatively impact the country's projected GDP growth in 2025.
"Over the past two years, the dram's appreciation has resulted in substantial losses for businesses. For instance, in 2022, an IT company would receive 4.8 million drams for $10,000, whereas now it earns around 3.8 million drams. Similar losses of up to 1 million drams per $10,000 in revenue affect exporters and the tourism sector," Tavadyan noted.
He attributes the current situation largely to Armenia's economic dependence on Russia. Armenia's economic growth in 2022 was driven by an influx of capital and workforce from Russia, while in 2023, it was fueled by the re-export of Russian gold. The recent weakening of the Russian ruble, triggered by new U.S. sanctions on Gazprombank and a statement by the European Commission President about phasing out Russian gas, has added pressure on regional currencies.
"While a weaker dram would benefit the real economy, this scenario is unfavorable for both the Central Bank, which fears inflation and capital outflow, and the government, as it would lead to higher public debt servicing costs and a decrease in GDP in dollar terms," Tavadyan emphasized.
Analyzing historical data since 2012, the economist identified three periods of dram stability and three significant shocks, including the effects of Russian currency crises and security challenges. Tavadyan warns that the current dram appreciation could result in a sharp exchange rate spike in the future, potentially breaching the legally established public debt ceiling.
