About 75% of Armenia`s exports are precious metals and stones, which  speaks of vulnerability of Armenia`s economy

ArmInfo. 75% of Armenia's exports in Q1 of 2024, were precious and semi-precious stones and metals. An  increase in gold re-exports has been observed since November 2023.  This circumstance contains great risks, because economic growth is currently exogenous, and in the event of a change in any of the  external incentives, as well as a significant decrease in gold re-exports, the Armenian economy will become vulnerable. A similar assessment was made by Associate Professor of the Armenian State University of Economics, economist Aghasi Tavadyan.

The economist notes that over the past two years, exports and imports  have increased 2.8-fold and 2.3-fold, respectively. Thus, in 2023,  exports increased by 55.3% - from $5.4 billion (2022) to $8.4  billion, and imports from $8.8 billion to $12.3 billion (an increase  of 40.2%).

At the same time, during the last two and a half years, there have  been significant changes in the structure of Armenia's trade  turnover. Precious stones and metals (HS 71) - mainly gold exports,  have become the dominant export industry - re-exports of precious  stones and metals accounted for about 1/3 of total exports in 2023.  The rapid growth of gold re-exports started in November 2023 and  continues to this day. In 2023, 2/3 of re-exports were re-exports of  this type of product.  Armenia's y-o-y exports reached $11.2 billion  in March 2024, of which 54.7% or $6.1 billion were exports of  precious and semi-precious stones and metals. The expert recalls that  this figure was $6.3 billion in March 2023, of which $1.3 billion or  20.2% was the export of precious and semi-precious stones and metals.

Precious and semi-precious stones and metals worth $6.1 billion were  mostly re-exported from Russia to the United Arab Emirates and Hong  Kong. Tavadyan estimates that re-exports (over a 12-month period)  will amount to about 65% of $11.2 billion in March 2024.  As the  economist notes, in Q1 2024 alone, RA exports amounted to $4.4  billion, and imports - $4.7 billion.  For comparison, in Q1 2023,  exports amounted to $1.6 billion (an increase of 2.72-fold ), and  imports - $2.7 billion (an increase of 1.76-fold). At the same time,  in 2021, the total export of Armenia was 3 billion dollars, and the  import was 5.4 billion dollars. During this period, imports exceeded  exports 1.62-fold, and in the first three months of 2024 the ratio is  1.07. "In other words, in the first 3 months of 2024, imports exceed  exports by only 7%, which at first glance is great progress in terms  of balancing Armenia's historically negative trade balance, but  structural changes tell a different story," the expert says.  If in  the next quarters of 2024, exports and imports show similar dynamics,  then by the end of the year, exports will amount to about $18  billion, and imports - $19 billion, that is, for the year the growth  will be about 2-fold and 1.6-fold, respectively, he forecasts.

At the same time, as Tavadyan notes, in Q1 2024, 74.6% of exports  were precious and semi-precious stones and metals worth $3.3 billion.  Most of the precious and semi-precious stones and metals - 76% - are  re- exports of gold - $2.5 billion or 37.5 tons. The export value of  one ton was $66.9 million. During the same period, according to  official statistics, 56.2 tons of gold were imported with a total  value of $2.2 billion.  The import value of one ton was $39.6  billion. The average price of one ton of gold internationally market  amounted to $73.1 million during this period, the economist explains.

If we compare Q1 2024 with Q1 2023 by enlarged commodity groups of  exports, then growth was recorded mainly in precious stones and  metals (8.7-fold), textiles and footwear (42.7%), while ore and  concentrate had recovery growth (18.5%). Exports of all other  traditional goods decreased: exports of metals and products made from  them decreased 2.3-fold, exports of vehicles and equipment, which,  according to Tavadyan, also represent re-exports from other countries  to the Russian Federation, decreased by 12.4%, exports agricultural  products (except drinks) decreased by 17.0%, tobacco - by 6.1%,  alcoholic and non- alcoholic drinks by 1%, exports of chemicals - by  31%, electricity - by 35.5%.

Thus, Aghasi Tavadyan summarizes, in general there is an increase in  exports and economic activity, but in fact we are dealing with a  large re-export of gold and a fairly significant decrease in the  country's traditional export goods. The economist comes to the  conclusion that without gold, economic activity and other indicators  would be much more modest, which poses greater risks.

Tavadyan's technical analysis is supported by the opinion of ArmInfo  analysts, who note that "golden" re- export became possible after  Russia introduced customs duties for all countries except members of  the EAEU. Armenia took advantage of this opportunity very quickly and  enterprisingly.