Net investment flow into Armenian economy shifted from positive  $146.5 million to negative $91.3 million

ArmInfo.In the first half of 2024, the total foreign investment flowing into the real sector of the Armenian economy decreased to a negative AMD 35.4 billion ($91.3 million) from a positive AMD 56.5 billion ($146.5 million) in the first half of 2023.

This is evidenced by the data of the RA  Statistical Committee, indicated as a net flow, meaning the  difference between attracted and repaid foreign investments.  Similarly, the net flow of foreign direct investment (FDI) also  deteriorated, dropping from a positive $281.5 million (AMD 108.7  billion) to a negative $54.8 million (AMD 21.3 billion).

A year ago, the top five leaders in terms of positive net investment  flow into the Armenian economy were the UAE, Luxembourg, Canada,  Georgia and France. However, currently, only Luxembourg and Canada  have managed to maintain a positive level, which is significantly  lower than the leading levels seen previously.

A year ago, the UAE, was the leader in positive and significant  investment flow ($269.2 million). It now ranks 2nd  in negative  investment flow ($32.7 million), following the Virgin Islands ($80  million) and proceeding Cyprus ($12.3 million). Moreover, the  investment focus have shifted in these areas: the UAE - from  financial intermediation and cigarette production to metal ore  mining; the Virgin Islands - from metal ore mining and retail trade  to the hotel business; Cyprus has reduced investments in the  telecommunications sector and energy projects, while increasing  investments in metal ore mining, basic metals production, wholesale  trade, hotel business and legal and accounting services, and  expanding into housing construction, IT, and financial  intermediation.

As a result, there has been shift in the composition of the TOP-5  with the highest positive net investment flow. In particular,  according to the results of the first half of 2024, Russia regained  its leadership, followed by Sweden, the USA, Switzerland and the  Netherlands. It is worth noting that both the leader, Russia, and the  Netherlands, which now holds the fifth position, were in the two top  spots for negative net investment flow a year ago.

Thus, according to the results of the first half of 2024, the leading  positive net flow of total investments from Russia amounted to AMD  10.2 billion ($26.3 million), with an annual growth of 2.3 times.  Moreover, a more significant growth was noted in the net flow of FDI  from Russia - 3.2 times to AMD 8.7 billion ($22.4 million).  Currently, the lion's share of investments from the Russian  Federation goes to the extraction of metal ore - over 91%, a much  smaller share went to the real estate market, beverage and food  production, the metallurgical industry, and a very small amount was  directed to the supply of gas and electricity, the pharmaceutical  industry, the production of computers and electronic / optical  equipment, and the agricultural sector.

 Russian capital investments in wholesale trade, land freight, and  research and development have been significantly reduced. Investments  from the Russian Federation in the telecommunications sector and  financial intermediation have been completely zeroed out. Sweden  moved up to 2nd place (from 7th a year ago) in terms of positive net  flow of total investments - AMD 9.1 billion ($23.6 million), with an  annual growth of 8.6 times. The dominant part of Swedish investments  - 99% for the first time was directed to segments related to the  metallurgical industry, and the rest was in wholesale trade, which  previously received the entire volume of investments.

The United States has moved up to 3rd place (from 6th place last  year) in terms of positive net flow of total investments - AMD 8.5  billion ($21.8 million), with a growth rate of 3.2 times. Of this  amount, 84% or AMD 7.1 billion ($18.3 million) are FDI, showing a   57%  annual growth. Most of these investments, as before, continued  to be directed to the IT sector and the production of basic metals,  with additional investments in cigarette production, housing  construction, and wholesale trade. American investments in energy  projects, the hotel industry, and research and development activities  have significantly decreased.  Switzerland has moved up to 4th place  (from 8th a year ago) in terms of positive net flow of total  investments - AMD 7.2 billion ($18.5 million). Of these, 93% or AMD  6.7 billion ($17.4 million) are FDI.  Both of these indicators have  seen a significant increase year-on-year, growing by 8-9 times.    Switzerland primarily invested in housing construction, followed by  the IT sector, the retail and hotel business. There are also  investments in energy projects. However, Switzerland significantly  reduced investments in wholesale trade and scientific research, and  completely zeroed out investments in cigarette production. The  Netherlands saw a positive net flow of investments with an increase  from negative to a positive in a year to AMD 5.7 billion  ($14.8  million, and this is entirely FDI), with an annual growth of 2.4  times. The majority of Dutch investments were in extraction of metal  ore, and the rest - in wholesale trade, accounting and legal  services. At the same time, investments in energy projects, as well  as in the IT sphere, decreased. Investments in the telecommunications  sphere were completely stopped. 

Let us recall that in 2023, the Russian Federation experienced a  decline in investments: the net flow of total investments fell from a  positive 158.6 billion in 2022 to a negative AMD 68.6 billion   ($169.5 million), including FDI - from a positive 109 billion to a  negative AMD 25.1 billion  ($62.1 million). The TOP-5 in terms of  investments in 2023 were the UAE, which increased the volume by 50  times - to $257.6 million, followed by Luxembourg, Canada, France and  Switzerland, which also significantly increased the volume of  investments. The shift in investments dynamics of Russia was a result  of the decreased interest in relocating to Armenia and moving capital  and business. (The calculated exchange rate of the dram against the  US dollar on 30.06.2024 was AMD 388.16 /$1, against AMD 386.06/$1 on  30.06.2023 and AMD 404.79 /$1 on 31.12.2023).