Russian money flowing back. What awaits  Armenia`s economy? -Aghasi  Tavadyan

ArmInfo.The Russian-Ukrainian war has radically changed the economic landscape of Armenia. In 2022,  there was a significant increase in money and capital flowing in the country. However, in 2024, there was not only a decrease in this influx, but also an outflow, which poses a serious threat to the stability of the banking system. This is stated in the economic analysis done  by Aghasi Tavadyan, an expert at the Amberd Research  Center and the founder of the analytical portal tvyal.com 

The expert notes that in 2022, an unprecedented amount of capital  came to Armenia, primarily from Russia.  As a result, the volume of  transfers increased by 2.5 times, from 2.1 billion US dollars to 5.2  billion US dollars. The volume of funds received from Russia alone  quadrupled, rising from $865 million to $3.6 billion.  This huge  influx of capital brought about two important changes. Firstly, the  dram strengthened significantly going from AMD 480 to AMD 05 per  dollar. Secondly, the profitability of the banking system reached an  unprecedented level: with profits nearly tripling to 255.6 billion  drams. Ardshinbank alone reported a profit of 62.2 billion drams.

It is noteworthy that until 2022, most remittances from Russia were  sent by labor migrants. However, since 2022, the situation has  changed dramatically: remittances have become predominantly  commercial in nature. This shift meant that Armenia became a country  that capital, not labor. With the income tax refund law   fully in effect in Armenia (within the framework of mortgage lending  - ed.), a significant part of this capital was directed to the  construction sector. In 2023, the growth rate slowed to 9.7%, but the  volume of inflows remained impressive at $ 5.7 billion. In 2024, the  situation changed again. Transfers to Armenia slowed down, while the  amount of money leaving Armenia increased significantly.  In 2023,  the growth rate slowed to 9.7%, but the inflow remained impressive at  $ 5.7 billion. In 2024, the situation changed again. Transfers to  Armenia slowed down, while the volume of money leaving Armenia  increased significantly.

December 2024 is particularly noteworthy - $ 691 million came from  Russia alone, compared to $ 300 million in previous months. This  sharp increase without any economic justification may indicate that  we are on the verge of a new phase of capital outflow, according to  Tavadyan.

Where does the money from Armenia go?

< Interestingly, the majority of the outflow - 20.3% - comes from the  United Arab Emirates. This is not a coincidence. Nearly half of  Armenia's exports go to this country, primarily re-exports of gold  and diamonds from Russia. The United States follows in second place  with 13.5%, and Switzerland is in third place with 10.5%. Together,  these three countries make up almost half of the outflow.  The most  interesting change has occurred with remittances from labor migrants.  In 2013, about 20% of Armenia's income came from labor migrants, when  1,000 rubles were worth 12,000 drams. Today, the situation is  completely different. The ruble has depreciated (1,000 rubles = 4,000  drams), and the dram has strengthened. As a result, the share of  income from migrant labor in GDP has fallen to 4%, of which only half  comes from Russia. Yesterday's "khopanchi" is now building new  buildings in Yerevan, the economist notes. 

Signs of a potential economic decline

The decrease in capital inflows (9.7% growth in 2024 compared to 146%  in the previous year) and the rise in outflows (14.7%) pose a serious  threat to the stability of the banking system.

Aghasi Tavadyan  concluded.