The World Bank’s September economic update on Armenia says economic activity growth slowed to 6.5% year-on-year in July 2026, down from 7.4% in June. Even so, cumulative growth for the first seven months of the year remained strong at 7.7%, exceeding initial projections.
The report says construction and non-trade services remained the main growth engines, expanding by 26.5% and 17% year-on-year, respectively. The construction surge was accompanied by a pickup in real estate: apartment transactions in Yerevan nearly doubled in July, while prices in the city center rose 12.7% from a year earlier. According to the World Bank, that trend was fueled by a new influx of Russians and demand from the Armenian diaspora.
Business registrations also increased by 29% in July, including a 45.7% jump in LLC registrations. Industrial output, however, posted only modest growth of 3.1%. Strong gains in mining, up 14.4%, and manufacturing, up 5.9%, were largely offset by a 24.5% contraction in electricity and energy linked to the temporary shutdown of the Armenia Nuclear Power Plant (ANPP) for scheduled maintenance. Overall economic activity in January–July rose 7.7% year-on-year.
Inflation edged down to 4.4% in August from 4.5% in July. Food and non-alcoholic beverages accounted for 57% of overall inflation, even though price growth in that category slowed from 8.6% in June to 6.4% in August. Core inflation remained close to headline inflation, which the report says reflects strong domestic demand and a narrowing output gap. At its 4 August meeting, the Central Bank of Armenia kept the policy rate unchanged at 6.5%, maintaining its commitment to the 3% inflation target.
External trade showed diverging trends in July: exports fell 15.7% year-on-year, while imports rose 21.5%. The export decline was driven mainly by a 66.2% drop in precious and semi-precious stones. Excluding that re-export item, exports actually rose 6.8%, led by minerals, which increased 59.1% from a low base.
Agricultural exports fell sharply, with vegetable products down 52.2% and agriproducts down 15.2%. The World Bank links this to Russia’s tighter restrictions on Armenian agri-food imports introduced from April 2026, including a ban from June 12 on quarantine products covering around 130 EAEU goods, including fresh produce and flowers, and a ban from June 26 on fish products. Import growth was driven by a doubling in machinery and equipment imports and a 61.2% rise in minerals imports. Over January–July, exports fell 7.9% and imports rose 7.7%, widening the trade deficit to 10% of estimated annual GDP, though this was partly offset by services and income accounts. Tourist arrivals, mainly from Russia, increased 6% over the same period.
In July, net non-commercial money transfers rose 40% year-on-year from a low base, driven largely by continued inflows from Russia, which were up 37.3%. The sustained influx of Russians into Armenia also supported that trend. Against that backdrop, the dram strengthened by 0.4% against the USD and by 1.1% against the EUR in August on a month-on-month basis. Compared with August 2025, the AMD was 4.6% stronger against the USD, though it had depreciated 8.6% year-on-year against the RUB. Supported by solid remittance and capital inflows, gross reserves expanded to a record $6.5 billion in August, equal to 4.3 months of import cover.
The report says financial system indicators remain sound. The Capital Adequacy Ratio was unchanged at 20.4% in July, while non-performing loans stayed at 1.4%. Commercial bank deposits increased 2.7% month-on-month and credit rose 1.4%, bringing the loan-to-deposit ratio to 1.07.
In public finances, the budget posted a deficit of 0.3% of estimated annual GDP in July. Revenues rose 16.3% year-on-year, supported by strong tax collection. VAT and income tax each increased by about 16% and together accounted for nearly two-thirds of revenue growth. Total expenditure rose 20.1%, entirely because of current spending, which increased 23.1%. Social spending, including health, jumped 34.5%. At the same time, capital expenditure fell 8.9%, largely due to a 12.1% decline in defense spending.
Through July, capital spending had reached only 33% of the annual budget plan, pointing to significant delays in public investment. Health spending continued to surge, rising 76.1% in July under the public health insurance scheme, and cumulative health expenditure had reached 82% of the annual plan by end-July, indicating possible additional financing needs. On a cumulative basis for January–July, the budget remained in surplus at 0.3% of GDP, compared with a planned full-year deficit of 4.3% of GDP. Government debt stood at 41.3% of GDP in July and is expected to rise further by year-end.
Figure 1. Economic activity growth slowed to 6.5% in July
Figure 2. Net non-commercial money transfers rose sharply in July
Figure 3. Inflation eased to 4.4% as food price growth slowed
Figure 4. Exports fell in July as stones and agricultural products declined
Figure 5. Yerevan’s real estate market has picked up in recent months
Figure 6. A surplus equal to 0.3% of estimated annual GDP was recorded in January–July
