"Fact" daily writes:
Despite the initially positive dynamics of macroeconomic indicators in Armenia and the acceleration of economic activity over the past year, the emerging picture is much more multi-layered and worrying than it may seem in the case of a superficial assessment. The growth of economic activity, which reached 8.3 percent in December 2025 as a result of 11 months (January-November) compared to 7.4 percent in the same period last year, does not in itself mean stable and inclusive economic development. On the contrary, the structural analysis of that growth reveals a number of risky trends that in the medium term may create serious challenges for both economic stability and social well-being.
First of all, attention is drawn to the fact that the growth of economic activity is formed not at the expense of export and productivity-oriented sectors, but mainly as a result of the activation of industries based on domestic demand. Statistical data show that the main driver of economic growth in January-November 2025 was the construction sector, where the growth rate increased from 14.9 percent to 20.1 percent. This may be due to the activation of public capital expenditures, infrastructure projects, as well as private construction, but if such growth is not associated with the expansion of industry and exports, then it is short-term in nature and cannot create a long-term productive base.
Construction, being a cyclical sector, is sensitive to changes in both financial flows and state budget policies, and economic growth based on it can easily turn into a recession in the event of external or internal shocks.
A similar picture is observed in the services sector, where the annual growth accelerated from 6.3 percent to 10.9 percent. Although the development of services is a natural process of modern economies, in the case of Armenia it is largely determined by domestic consumption, financial injections, commercial and domestic services, but it is noteworthy that highly added value-creating, exportable services occupy a very small place in it. One of the most problematic impulses is the sharp deterioration of foreign trade. If a year ago foreign trade was one of the key pillars of Armenia's economic growth and recorded significant growth, in 2025 it continued to decrease at double-digit rates.
Such a reality indicates not only the limitation of export opportunities, but also the problems of the competitiveness of the economy. The slowdown in foreign trade means a reduction in foreign currency inflows, increasing pressure on the balance of payments and deepening dependence on economic activity formed at the expense of domestic consumption and imports. The state of industry is closely related to foreign trade, which today is becoming one of the weakest links of the economy. The data of the Statistical Committee show that the industrial sector, which was the engine of economic growth a year ago, has practically stagnated in 2025. If in 2024 the annual growth of the industry was 7.6 percent, then in 2025 it decreased to only 0.5 percent, which can be described as growth inhibition.
This means that the economy loses its production base, and without industrial development it is impossible to ensure sustainable exports, technological modernization and long-term job creation. Acceleration of inflation creates an additional risk against this vulnerable economic structural background. In January-December 2025, consumer inflation in Armenia reached 3.3 percent, compared to 1.5 percent last year. Although this level can be considered moderate, its structure and dynamics give cause for serious concern. The main driver of inflation was a 4.6 percent increase in food prices and a 3.1 percent increase in service tariffs, while a year ago these indicators were significantly lower, 2.2 and 2.5 percent, respectively.
The prices of non-food products, which decreased by 1.8 percent in 2024, have already shown an increase of 0.9 percent in 2025. This means that inflation becomes more widespread and permeates almost all components of the consumer basket. It is especially important to pay attention to the acceleration of the average monthly growth of consumer prices, which was 0.3 percent in 2025 compared to 0.1 percent in 2024. This trend indicates not a one-time price shock, but the formation of stable inflationary pressure, which may continue in the following years.
The increase in the price of food and services has a particularly heavy impact on low and middle income groups, as these categories have the largest weight in their spending structure. As a result, the apparent increase in economic activity does not translate into an increase in real welfare, but is accompanied by an increase in the cost of living and a potential increase in social tension. If the observed trends persist and deep changes are not made to increase productivity, revive industry, promote exports and control inflation, the current growth will have only a short-term effect.
ARSEN SAHAKYAN
