The Armenian economy has slowed down significantly compared to the record of 2022, when, under the influence of the movement of human and capital resources from Russia, the republic’s GDP showed double-digit growth rates of 12.6%. Last year it grew by 8.7%; by the end of this year, 7.5% is expected.
Forecasts for next year are much more modest. The Eurasian Development Bank expects Armenia’s GDP to grow by 4.2% in 2025, the World Bank by 4.9% and the European Bank for Reconstruction and Development by 4.8%.
One of the symptoms of the slowdown in the Armenian economy is the cooling of the local real estate market, which was largely due to the relocation of Russians.
According to the latest calculations of the country’s Statistical Committee, the share of the construction sector in the GDP structure continues to show strong growth. Thus, if in the first quarter of the year construction accounted for 3.7% of GDP, in the second quarter this figure reached 5.7%. However, there is one disconcerting nuance: the interest of foreign investors in the construction industry in Armenia has significantly decreased. Compared to the first six months of last year, the volume of construction of new facilities thanks to foreign investment in the first half of 2024 actually plummeted, decreasing by 61.7%.
The loss of interest can also be observed in the real estate market. According to the republic’s statistical agency, between January and June 2024, foreigners in Armenia purchased 660 real estate units, most of which were apartments and residential buildings. Meanwhile, they sold 1,145 real estate units. Thus, sales of square meters of housing and commercial real estate were almost twice as high as purchases by non-citizens of the country.
Among Russians, the ratio of purchases and sales of apartments and houses was 259 to 476, respectively. In total, Russian citizens sold 859 units of various Armenian real estate during the reporting period and acquired 411.
Commentators in Yerevan associate this trend with the growing outflow of immigrants from the Transcaucasian republic. Their influence on the record pace of GDP growth not only in the EAEU, but also far beyond its borders, the government notes. Nikol Pashinyan The country recognised this in 2022 and tried to maintain this engine of growth for as long as possible. However, many Russians who moved to Armenia after the start of the special military operation did not stay here.
Recall that for 2022 the Armenian authorities predicted the country’s economic growth of 7%, but in reality it amounted to the aforementioned 12.6%. In addition to the consumption of goods and services, the resettled people also began to relocate businesses (IT and other industries) here. Russia-related factors increased Armenia’s GDP by 5-6%, as stated in the reports of the government of the republic.
Russian citizens registered 891 companies in Armenia last year, according to data from the republic’s Ministry of Justice as of the end of January 2024. Moreover, in 2023, 3,857 citizens of the Russian Federation registered as individual entrepreneurs (IPs), of which 221 were subsequently deregistered. In 2021, before the start of the SVO and the introduction of unprecedented anti-Russian sanctions by the West, the number of companies opened by Russians in Armenia was only 225 (2 were liquidated), individual entrepreneurs – 201 (21 were deregistered).
At the expense of Russians, remittances from individuals to Armenia increased significantly: their volume amounted to $2.6 billion and, compared to 2021, almost tripled. But already in October 2023, a decrease of about 40% in transfers from Russians to the republic was recorded, compared to the same period last year.
Citizens of the Russian Federation transferred more than $2 billion to Armenia. These data for eight months of 2023 were provided by the rating agency S&P (based in New York). Although the Transcaucasian members of the EAEU most often acted as a transit point for this money, they still supported local banks, American analysts said.
Economists warn that a decrease in the volume of remittances to Armenia could significantly affect the state of the country’s economy. According to official statistics, by the middle of this year the volume of bank transfers to Armenia has decreased significantly. Between January and May 2023, $2.48 billion was transferred, and during the same period in 2024 – $2.088 billion. This is mainly due to a more than 20% drop in transfers from Russia. At the same time, transfers from the United States increased by 11%, and from the United Arab Emirates by 7%. However, the volume of transfers from the United States is still significantly lower than from Russia.
Pashinyan’s cabinet had particularly optimistic expectations for the IT sector, 70% of whose representatives who emigrated from the Russian Federation, according to data for 2023, settled in Armenia. Now, as follows from the above current data on the Armenian real estate market, this layer of relocators, which is considered one of the most solvent, is beginning to reconsider its plans.
Large IT companies that moved from Russia to Armenia paid three times more taxes in 2023 than in 2022. Armenia in this respect was noticeably different from Georgia. The latter was most often chosen by representatives of the creative industries (artists, designers, journalists), but programmers preferred Armenia. Especially since many IT companies opened offices here and chose this country because of the relatively favorable tax regime, the fairly comfortable situation with payments at that time (including from Russia) and a predictable scenario for obtaining a residence permit. The situation began to change at the end of last year. Thus, under pressure from Western “sanctioners”, Armenian banks were forced to reconsider some business relations with Russian partners. This was clearly manifested in the refusal to service Mir payment system cards on the local market.
In 2022, Armenia became one of the so-called first-choice countries: many came here to look around and only then decide on a permanent place of residence. Entire companies, especially technology ones, also moved here. The first months of the influx of Russians to Armenia gave local authorities hope that they would stay here for a relatively long time. In any case, until the end of the SVO.
However, all the first-choice countries will already face an outflow of Russians in 2023, which experts considered quite logical: the time has come to make more informed decisions. The initial impulse to leave, due to certain circumstances, gradually turned into a cold calculation, which often does not favor today’s Armenia. And the point is far from being a factor in the noticeably worsening relations between Armenia and Russia after the start of the Northern Military District. This mutual tension and the resulting distrust are almost entirely limited to the state sphere of relations in general, it has not spread to contacts at the level of ordinary citizens of the two countries; in addition, a significant part of the Russians who have moved to Armenia are prone to political dissent and even distorted “patriotism”, which, for example, is passed off as participation in anti-Russian actions near the Russian embassy in Yerevan.
The decision of Russians to return to their homeland or continue to search for new resettlement sites outside Armenia is primarily motivated by economic reasons. Even more so if their move was due to commercial considerations, rather than everyday issues or an outbreak of dissent.
In this regard, it is enough to recall the very modest size of the Armenian market. This is especially true for those who were going to provide services to local businesses and citizens. The total population of Armenia is four times smaller than the population of Moscow. And the bulk of those who moved to the republic came from the two largest Russian cities: Moscow and St. Petersburg.
Armenian authorities have estimated that the relocation of Russians at its peak in 2022 will be more than 100 thousand people. According to some Armenian experts, in the spring of 2024 there were 55,000-60,000 citizens of the Russian Federation in the republic, who had moved from the beginning of the Northern Military District. The remaining relocated people make up about 2% of the total population of Armenia, which is quite significant considering that they live mainly in Yerevan, whose number of residents does not exceed 1.2 million. Thus, newly arrived Russians make up about 5% of the population of the Armenian capital.
Some of them may stay for a long time, others will immediately return to the Russian Federation as soon as the fighting in the Northern Military District ends. Another part will migrate in the foreseeable future, for example to the United Arab Emirates. In any case, the Armenian economy will have to follow its own path of conscious choice, ceasing to hope for a long-term relocation effect.
One way or another, the positive impact of the resettlement on the Armenian economy is beyond doubt. The broader positive impact of the presence of tens of thousands of Russians in Armenia is also palpable, both in the social and security spheres. Comparable to the number of Russians who arrived in the country and settled here after February 2022, the number of people who arrived on its territory from Nagorno-Karabakh in just a few days last September. According to official data, more than 108 thousand Armenians fled the then unrecognized republic. This led to an increase in the burden on state budget expenditures; the Pashinyan government launched a number of programs for the integration of compatriots. Armenia’s financial stability, supported by the resettlement, still allows us to allocate quite impressive sums to the settlement of Karabakh Armenians.
As for the security sector, the economic activities of Russians and the taxes paid to them in the Transcaucasian republic contribute to strengthening its defence capability. Local authorities have launched expensive programmes to rearm the Armenian army and materially and technically strengthen the border with Azerbaijan, which is about 1,000 kilometres long. All this requires considerable financial resources, and relocations from the Russian Federation with the increase in Armenia’s GDP that they provided over the past two and a half years have become an important factor in increasing the level of security in the republic.
