LUYS Foundation warns of economic crisis looming over Armenia

In a sobering report issued by the LUYS Foundation, Armenia's economic stability is depicted as precariously balanced on the precipice of collapse.

The foundation's findings, derived from data compiled by the Statistical Committee of Armenia for the initial two months of 2024, indicate alarming trends that demand urgent attention, Caliber.Az reports.

This warning underscores the vulnerability of Armenia's economic trajectory, heavily reliant on transient factors susceptible to abrupt shifts.

"The growth of economic activity in Armenia accelerated sharply in February 2024, but this is due to a short-term factor," the report states. "The economic activity rate in February was 16.3%, which, however, was mainly due to a sharp increase in jewellery activity. This is dangerous because it is completely dependent on unpredictable external factors; due to a sudden change in the environment, a complete cessation of activity is possible," the report says.

The report further highlights the concerning decline in vital sub-sectors of Armenia's manufacturing industry, including food, tobacco, clothing, and chemical production.

“Along with high rates of industrial growth, some sub-sectors of the manufacturing industry that are important for the Armenian economy continue to decline. In particular, a decline in January 2024 was recorded in the sub-sectors of food, tobacco, clothing, chemical industry and chemical production. It turns out that the types of relatively stable and long-term activities of the manufacturing industry are declining, and short-term activities are significantly increasing, worsening the structure of the industry,” it adds.

Moreover, despite apparent economic growth, underlying issues in export volumes persist.

“The most problematic thing is that against the background of high growth rates the existing problems in the sphere of exports, in particular, the decrease in the volumes of exports of a number of goods, are overshadowed. In January, in particular, the export volumes of commodity groups ‘finished food products’ and ‘animals and products of animal origin’ decreased, a significant drop in exports of mineral products is also problematic.

As economic growth accelerates, tax revenues are growing at a rather slow pace. In January–February 2024, tax revenue growth amounted to 7.9%, and in case of comparability... the growth will be 3.7%. Naturally, this is a concern given the increase in spending by more than 30%, as well as the government's policy goals of increasing the tax-to-GDP ratio,” the article reads