The Precious Effect: The Illusion of Economic Growth in 2024
The illusion of economic growth in 2024
The Real Picture of Armenia’s Economic Growth
At first glance, Armenia’s industrial growth figures for 2024 look promising, showing a 4.7% growth compared to 4.1% in 2023. However, beneath these superficial numbers lies a more complex reality.
Chart 1.
In October 2024, Armenia proudly led the EAEU countries with a 17% industrial growth. But this achievement was short-lived. While the export figures for 2024 show an impressive 51% growth compared to the previous year, by the end of 2024 a sharp decline had already been recorded. In December 2024, exports fell by half compared to the previous year, and total foreign trade turnover decreased by 37.7%. That is, we have a 51% growth over the year, but a sobering 2 times decrease for the last month. This is concerning and a harbinger of an economic “bubble”.
Chart 2.
The reason? Large-scale re-export transactions of gold carried out from Russia through Armenia, which temporarily inflated economic indicators. This “golden bubble” reached its peak in March 2023 when 1.1 billion USD of “exports” of precious stones and metals were recorded, but by the end of 2024 this figure had already dropped to 119 million USD, a tenfold decrease. In fact, the real stimulus that provided economic and export “growth” has already decreased 10 times. We predicted this. This external stimulus coming from Russia managed to inflate the annual cumulative figure for 2024, but, as we noted, the figures for the end of 2024 have already recorded a sharp decline.
Chart 3.
Industrial Illusion
The seeming power of the industrial sector in 2024 masks the fundamental weakness of the economy. As seen in the second chart, almost no production growth was recorded in 2023. The growth began to show only in November 2024, alongside the launch of billions of dollars in gold re-exports, which continued until March 2024 and provided the lion’s share of production growth in the Economic Activity Index (EAI). Official statistics show growth, but 90% of this growth belongs to the “gold industry”, essentially re-export operations, rather than actual industrial production. Note that as a result of some rearrangement since the beginning of 2024, the “gold industry” is already hidden under the “basic metals industry” article. It should also be noted that in the first half of 2024, 71% of total exports consisted of the re-export of precious stones and metals, creating an illusion of export diversification.
Illusory Export Diversification
As a result of this “diversification”, we have:
- The United Arab Emirates are already in first place for Armenia’s exports. In other words, in terms of UAE currency representation, we already export more than to the RF. An important achievement. However, this merely reflects the gold re-export route, not true market diversification.
- A reduction in exports to Russia and the European Union. Traditional exports to major partners have actually decreased; exports to Russia have shrunk by an initial 16%, and to the EU by an initial 25%.
Shift in Trade Dynamics
The foreign trade figures are particularly telling. In December 2024, the following were recorded:
- A 37.3% decline in total trade turnover (in current prices),
- A 2-fold reduction in exports down to 51.4% of the December 2023 level,
- A decline in imports to 73.5%.
However, the annual figures show a different picture:
- 41.5% growth in trade turnover,
- 53.1% growth in exports,
- 33.8% growth in imports.
The Silent Decline of Agriculture
Chart 4.
More concerning is the steady decline of the agricultural sector. From 12.9% of economic activity in 2017, the share of agriculture fell to just 6.6% in 2024. Starting from 2019, monthly agricultural data are no longer published in official statistics. It is worrying that monthly indicators for this important sector are not published. At the same time, wholesale and retail trade has become the dominant branch of the economy, accounting for 44% of economic activity. Together with services, these sectors account for 68% of the economy, creating a potentially dangerous situation for long-term economic stability.
Construction Resilience
A positive trend is observed in the construction sector, which shows steady growth:
- 12.9% growth in December 2024 compared to December 2023,
- 14.5% growth across the whole year,
- Maintaining positive dynamics despite broader economic challenges.
Predicted Warning
Nine months ago, in March 2024, in our analysis we gave early warning signals about these exact risks. We particularly warned about the unstable nature of the gold re-export scheme and its danger in creating artificial economic indicators. This bubble is already weakening, which means that the 2025 export figures and economic growth will no longer include this artificial stimulus, likely revealing a more sobering picture of the real state of the economy.
Future Prospects
The discrepancy between the annual and December figures suggests that 2025 could hold serious challenges:
- The cessation of gold re-exports will continue to affect industrial indicators,
- The trade balance may deteriorate as a result of the removal of artificial export stimuli,
- The predominance of the services sector increases the economy’s vulnerability to external shocks.
Additional Analyses
Read our additional materials on this topic: 💎🎭🔮️ Golden Illusion: The Real Picture of Armenia’s Exports 🐅🌆💸 Armenia: Caucasian Tiger or Expensive Dream? 🤒🟨♻️ Continuation of the Gold Rush: 75% of Armenia’s Exports are Gold and Diamonds 🌿🤨💎 The Precious Effect: Reasons for Economic Growth in 2024, published 9 months ago The complete list of our analyses
Sources
Economic Activity Index (EAI) reports: