Industrial potential declines in Armenia

Armenia’s domestic industry continues to show signs of decline. This prolonged downturn is often explained as a natural adjustment following the removal of an external (gold-related) factor, bringing industrial output closer to its “real” potential.

From January to August 2025, industrial production fell by 7.8% compared to the same period last year. Both the mining sector (down 0.8%) and the manufacturing sector (down 13.2%) experienced declines. While the cancellation of gold re-export is indeed a key driver of this downturn, the question arises: is that the only reason, or is there cause for deeper concern?

Let’s consider one example: despite the overall decline, the food industry is showing growth. At first glance, this seems like a positive signal, but a deeper analysis raises questions. According to 2025 data, growth in the food sector continues, but the pace is slowing: 6.6% growth in January-February, dropping to 3.8% for January-August. If we assume the sector is approaching its potential, does this slowdown also reflect that potential? And could that be a problem?

Moreover, this year’s growth is measured against last year’s decline, meaning that in absolute terms, the increase isn’t as significant as the statistics suggest. Finally, a breakdown of specific product categories within the food industry reveals a decrease in production of certain goods. For example, pasta production is falling, and prices are rising. In other words, reduced output is accompanied by price hikes. Additionally, less brandy—a key export product for Armenia—is being produced and exported.

Therefore, a detailed analysis of industrial statistics suggests not a return to real potential, but rather a decline in the potential itself.