According to the report from the Central Bank of Armenia, the country’s economy grew by 6.4% year-on-year in the second quarter of 2024, exceeding the long-term sustainable growth estimate of 5%. The key drivers of this growth remain construction, trade, and financial services.
However, the Central Bank notes that the growth figures for previous quarters have been revised downward, mainly due to a reassessment of the added value in the manufacturing sector. This creates uncertainty regarding the balance between aggregate demand and supply in the economy.
The bank also points to the gradual decline in external demand, which has been observed since 2022. This is reflected in a decrease in real spending per tourist and the stabilization of tourist flows. In addition, the weakening of global demand has led to a continued decline in exports and IT services output, partly due to the outflow of highly qualified foreign specialists.
Regarding domestic demand, the Central Bank highlights conflicting trends. On one hand, the high growth rates of retail trade, consumer lending, and domestic tourism indicate strong internal demand. On the other hand, the centralized nature of economic growth, a reduction in remittances, and weakening labor market conditions may suggest a relatively weak demand environment.
The Central Bank of Armenia also draws attention to the uncertainty surrounding the outlook for domestic demand, linked to changes in private sector debt burdens, the use of accumulated savings, and a slowdown in wage growth in the private sector.
Finally, the regulator warns of potential risks from additional demand stimulation through fiscal policy, associated with possible underperformance in tax revenues and increased spending on social programs.
