Decline in exports implies decrease in production

Armenia’s foreign trade continues to decline. From January to August, the drop reached 41.1%. It is no coincidence that the sharp decrease in the “precious and semi-precious stones” category—nearly 70%—played a major role, reflecting the statistical impact of the cancellation of the well-known re-export factor of rough diamonds. But does this mean there’s no reason for concern?

It’s worth noting that although the January-August cumulative figure shows a slight improvement compared to January-July (the rate of decline decreased by nearly one percentage point), the pace of decline accelerated sharply in August compared to the previous month.

In August, exports fell dramatically—down 40.8% compared to August of the previous year.

In the context of foreign trade, exports are especially important for Armenia. But why does export performance matter so much to us? One reason is that exports effectively expand the market for locally produced goods. As a small economy, access to external markets is vital for economic efficiency and achieving economies of scale.

A decline in exports may indicate either problems accessing foreign markets or issues with domestic production. Which are we facing? The answer lies in the drop in industrial output, although we also periodically face challenges with the export of specific goods. For example, this year we witnessed problems with brandy exports. Simultaneously, brandy production fell by around 30% from January to July. The link between production and exports is clear. In any case, regardless of the cause of the decline, reduced exports also mean reduced foreign currency inflows.

To understand how concerning the current export situation is, it’s enough to assess Armenia’s export statistics after excluding the impact of external factors. In that case, we see only a negligible increase—indicating a decline in export potential.