Armenia’s authorities’ statements of intent to join the EU have consequences for the country’s economy: Aza Migranyan

Aza Migranyan, head of the economic research sector at the Primakov Institute of World Economy and International Relations (IMEMO) of the Russian Academy of Sciences, commented to Alpha News on the economic situation in Armenia, as well as the economic consequences of Yerevan’s break with Russia and its pursuit of European Union membership.

“In absolute terms, Armenia’s economy is showing fairly high growth rates. Looking at overall GDP growth for the year, preliminary data puts it above 5%. That is, generally speaking, a solid position, however, it is worth noting the unevenness of that growth.

In 2025, very pronounced cyclical patterns are observed: growth rates drop sharply at the start of the year, then pick up again to a certain extent. Looking more closely at the characteristics of Armenia’s economic growth, the traditional factors driving it in 2025 become apparent. In particular, the turnover of agricultural products has a notably high level of influence, around 6%, meaning above-average growth,” she said.

Migranyan also noted that the real estate market, buying and selling of property, is making a significant contribution to the economy. “Construction statistics are also strong, roughly 11% overall. The largest contribution at present is coming from the growth of the services sector, particularly in finance.

As a result, we are seeing a situation that reflects a structural shift in Armenia’s economy toward service industries. This mirrors the strategy outlined and presented by Armenia’s authorities about five years ago regarding the main drivers of economic growth.

The one clarification worth making about the implementation of this strategy is that hopes for accelerated growth in the transport sector, as a transit territory, remain, for now, little more than wishful thinking. Questions related to building industrial growth, developing the manufacturing sector, and deepening processing capacity also remain where they were.

If we look at manufacturing, it has seen a slowdown in growth this year,” she said, adding that growth rates had previously been considerably higher, whereas now a ten-percent decline is being observed.

All of this, according to Migranian, indicates that questions of living standards, the quality of economic growth, and the long-term contribution of that growth are not, at present, being confirmed by other qualitative indicators.

“We can expect to see further expansion of the services sector — beyond financial services, digitalization, and fintech. There may be some growth in areas such as the creative economy and the integration of digital services into everyday life as a permanent feature.

Unfortunately, however, the development of the IT sector as an export base that could give rise to a kind of ‘Silicon Valley’ in Armenia and help build a new high-tech sector is not something we are observing yet, as competition in this field is extremely intense. The market is already quite firmly divided,” Migranyan said.

According to the expert, domestic demand in Armenia is narrowing due to high inflation, changes in household incomes following tax reforms that are reducing business activity, and the departure and reduction of external consumers – relocated individuals, as they were in 2022–2023.

She added that achieving sustainable economic growth requires breaking through to external regional and global markets. “This calls for integration and cooperation, which we are not yet seeing and for which no foundation currently exists. Nor can one speak of any sources of growth in domestic demand, as household incomes are not rising at a pace that would stimulate such demand,” Migranyan noted.

In the expert’s view, Armenia’s stated intention to join the EU is already producing tangible effects and consequences for the country’s economy. “Naturally, we are not merely seeing statements, we are seeing the economic effects and consequences of those statements as well.

The 2024 case, which concluded in 2025 with the exhaustion of additional revenue from the re-export of Russian gold, speaks volumes — the turnovers and volumes involved were extremely significant for Armenia’s economy. In addition, we are observing changes tied to the possibilities of maintaining old cooperative ties alongside new attempts to break into European markets. There are several nuances here.

First and foremost, these are questions related to the regulation of customs procedures that allow for preferential treatment and the free movement of goods without additional tax and tariff burdens. This, in turn, affects prices and the competitiveness of goods.

On the other hand, we are dealing with the strictly regulated practices of European authorities, where market entry is governed by very rigorous standards. Requirements for establishing quotas for each country, even in the case of association or membership, significantly limit the opportunities available,” Migranyan noted.

According to the economist, if Armenia were to trade the EAEU market for the European one, it would be left with virtually no access to the agricultural products market, or would be restricted by quotas, as has been the case with Moldova and Georgia, while simultaneously losing the ability to import goods into the EAEU on preferential terms.

“We understand that Armenia will not be able to sit on two chairs at once in this situation. The EAEU technical regulations and European standards differ quite radically,” Migranian stressed.

In the expert’s view, Armenia’s economic relations with Russia will not come to an end, but will be transformed. “When people say that Armenia’s economy will collapse, that will not happen. Economic relations will be preserved, but transformed. We will see growth in local service industries: tourism, hospitality, financial services, and other service sectors. However, the country is not yet a transport hub: key infrastructure elements are missing: transport arteries, pipeline systems, and other transit mechanisms. The likely outcome is a narrowing of economic activity to local markets and a transition to a service-based economic model, in many ways similar to Georgia’s, but without its transit potential,” Migranyan concluded.