Economic growth in Armenia slowed to 5.2% year-over-year in Q3 2024, nearing the estimated level of long-term sustainable growth, according to the Central Bank of Armenia's quarterly economic report.
The report highlights that construction, trade, and services remain the primary drivers of growth. However, the concentration of economic growth across sectors has decreased, while significant uncertainty persists regarding the balance between aggregate demand and supply.
The Central Bank noted that the robust external demand observed since 2022 is gradually waning, evidenced by the stabilization of tourist flows and adjustments in real tourist expenditures. Meanwhile, activity in certain "traditional" sectors of manufacturing, particularly food and tobacco production, has accelerated.
"Uncertainty regarding domestic demand conditions remains high," the report states. On one hand, strong growth in retail trade, consumer lending, domestic tourism, and services points to robust internal demand. On the other hand, the ongoing decline in remittances, slight weakening in labor market conditions, and a generally subdued inflationary environment suggest relatively weaker demand.
The Central Bank also flagged risks of additional demand stimulation from fiscal policy. These risks are primarily tied to potential shortfalls in tax revenue collections and concurrent increases in current expenditures needed to fund social support programs.
The regulator emphasized that the role of the private sector in managing accumulated savings will be pivotal in shaping the economic outlook. With reduced debt burdens relative to income in recent years, the impact on aggregate supply and demand will depend significantly on how these savings are utilized and on the trajectory of lending activities.
