Economy may remain stagnant without external factors – AlphaEconomics#72

The economic growth of the last years was mainly determined by external factors. In some cases, it was determined solely by external factors. Today, we are already witnessing continuous declines in external factors, which increases fears that the economy may remain stagnant.
Economic growth is slowing, which is a reflection of the following developments.

The effects of the Russian-Ukrainian war that started in 2022 led to a positive shock. As a result, the biggest contribution to economic growth was, among other things, the multiple increase in the number of tourists and the sharp increase in cash flows. For a long time, these indicators have been declining. In the first half of the current year, the number of tourists decreased by 6.1%, with the number of visitors from Russia dropping by 32.6%. Starting from 2022, this indicator refers not only to classic tourists but also to “relocants”.

We have a similar picture with cash flows transferred by individuals through banks.The 48.3% decrease in this indicator in the first six months of 2024 is mainly due to an almost 70% reduction in transfers from Russia.

It should be noted that the above indicators are only two external factors contributing positively to the Armenian economy. We have a similar picture in other cases.

Returning to the idea that if this situation persists and problems continue in the real sector of the economy, there is a high risk that the economy will remain stagnant. Not to sound biased, let us bring up several points: the decline in exports of domestic goods without re-export, problems in traditional areas of Armenian production, problems in the IT sector, a decline or very modest growth in the agricultural sector, etc.