Economic Activity Sees Strong Growth
In May 2025, Armenia’s economic activity index reached 10.4%, nearly doubling April’s 5.4%. For the January-May period, the growth amounted to 5.7%. This strong performance was mainly driven by a 22.2% increase in construction and a 10.8% increase in services excluding trade. At the same time, industrial output fell by 5.9%, though this decline was mitigated by a 17.9% rise in mining. The 13.5% contraction in manufacturing was largely due to reduced production of alcoholic beverages and non-ferrous metals.
Remittances Remain at a High Level
In May, net non-commercial remittances rose by 19.5%. Inflows from Russia surged by 48.3%, serving as the main driver of the overall increase. Meanwhile, remittances from the United States saw a slight decline.
Inflation Eased, Central Bank Holds Interest Rate Steady
In June, annual inflation dropped to 3.9%, down from 4.3% in May. Food (6.2%) and education (7.8%) prices continue to show strong growth. At its June 17 meeting, the Central Bank kept the refinancing rate unchanged at 6.75% to maintain inflation near the CBA’s 3% medium-term target.
Export and Import Decline Slows
In May, exports dropped by 39.3% and imports by 20.4%, a notable improvement compared to April when exports fell by 56.6% and imports by 41.1%. The sharp decline in exports was mainly due to a decrease in precious and semi-precious stones and vehicles. However, exports of traditional goods—such as processed food, textiles, and minerals—increased, helping offset the overall drop. Excluding the impact of re-exported goods, exports rose by 9.2% and imports by 14.3%.
During January-May, exports declined by 57.4% and imports by 42%. The trade deficit reached 7% of GDP, up from 5% the previous year.
International Reserves Increase
In June, Armenia’s gross international reserves increased by $145 million, reaching $4 billion, equivalent to about 3.1 months of import coverage.
Dram Remains Stable with Minor Fluctuations
In June, the Armenian dram depreciated slightly by 0.1% against the US dollar and by 3.7% against the euro. Since the beginning of 2025, however, the dram has appreciated by 3% against the dollar.
Stable Growth Continues in the Banking Sector
In May, dram-denominated deposits and loans in commercial banks grew by 1% and 1.3%, respectively. On an annual basis, adjusted for exchange rate effects, deposits increased by 13.6% and loans by 27.9%, with loan growth driven by an expansion in consumer lending.
Budget Recorded a Deficit in May
In May 2025, the budget posted a deficit of 0.8% of GDP. Tax revenues rose by 14.1%, driven by strong growth in VAT (17.9%) and turnover tax (72.5%). Total expenditures grew by 28.2%, mainly due to significant increases in capital and defense spending. While current expenditures grew modestly by 3%, social spending (benefits and pensions) rose by 12.8%.
For the January-May period, the cumulative budget deficit stood at 0.2% of GDP.
*The article was also prepared using data from AI․
