Golden Illusion: The Real Picture of Armenia's Exports

The Real Picture of Armenia’s Exports

A strange situation has emerged in the Armenian economy. Official statistics show an unprecedented growth in exports, but the reality is different.

At first glance, Armenia’s export indicators are astonishing. In 2024, the country’s exports reached $13.1 billion, more than quadrupling the $3.0 billion of 2021. Usually, such a sharp growth would mean that the economy is moving forward at full speed. However, a more detailed study reveals a not-so-positive reality.

Chart 1.

The first chart depicts the sharp change in exports. The chart shows that Armenia’s exports to the Middle East have skyrocketed, even surpassing exports to the Eurasian Economic Union (EAEU). At first glance, this might seem like a success in economic diversification, but the reality is different.

In 2024, the lion’s share of Armenia’s exports, an astonishing 61.4%, goes to a single commodity group: precious metals and stones, dominated by gold. However, Armenia is not experiencing a modern gold rush. Instead, it has become a major hub for Russia’s gold trade. In the first quarter of 2024, 88% of Russia’s gold exports passed through Armenia. Read more: 🇷🇺💰🇦🇲 Armenia: a haven for Russian gold.

This phenomenon is a typical case of re-export, and it has radically changed Armenia’s trade picture. The Middle East, especially the United Arab Emirates, has suddenly become Armenia’s main export destination, accounting for 42.4% of total exports in 2024. This is a massive shift compared to just a few years ago when the EAEU and the European Union were the main trading partners.

Table 1.

The presented table shows drastic changes in trade flows. The EU’s export share decreased from 21% in 2021 to a mere 4.7%. In 2024, EU exports decreased by 13.8% compared to 2023. This is not just a change in proportions, but a conceptual shift with far-reaching consequences. It should be noted that since 2018, EU exports have shrunk by 9.5%.

Table 2.

Table 2 shows the sharp changes in commodity groups by exports between 2021 and 2024. The most striking change occurred in the category of precious stones and metals (HS Code 71), which grew an astonishing 24.6 times, from $326.3 million in 2021 to $8 billion in 2024. This accounts for 61.4% of total exports in 2024, compared to just 10.8% in 2021. Significant growth was also recorded in the transport and equipment sector (HS Code 84-89), increasing 15.2 times from $95.4 million to $1.45 billion.

Meanwhile, Armenia’s traditional export sectors, such as metals and their products (HS Code 72-83), show stagnant or even declining results. These changes clearly indicate that Armenia’s export growth was primarily driven by re-export activities, rather than by local production or increased value added.

Of the $13.1 billion total export volume in 2024, around $9.3 billion (71%) is re-export, comprising precious stones and metals ($8.0 billion), electrical equipment ($1.1 billion), and machinery ($0.2 billion). If we subtract these goods from the 2024 exports, the real exports amount to about $3.7 billion, which is comparable to the 2021 total export figure of $3.0 billion. Here, the 71% was obtained by a simple calculation by adding together the trade turnover items for precious stones and metals, as well as equipment and cars. This proves that over the past three years, Armenia’s real export potential has not undergone a significant change despite the sharp increase in total export figures.

And what is happening with Armenia’s traditional exports? We should note that we evaluated the volumes of Armenia’s actual re-exports using a new methodology detailed in the article 🚀♻🟨 Gold Rush: Half of Armenia’s Exports are Re-exports. This analysis shows that Armenia’s “real” exports have actually decreased. According to a more in-depth estimate, about 75% of exports in 2024 are already re-exports, compared to 2021 when this figure was 6%. In fact, in 2024, excluding re-exports, real exports amounted to about $3.7 billion, which barely exceeds the $3.0 billion of 2021. Export figures also include re-exports. Thus, exports have already been inflated from the $3 billion figure in 2021 to $13 billion. That is an apparently impressive inflated growth of 4.3 times at first glance, currently at the expense of gold re-exports.

Our forecast is coming true. Half a year ago we wrote about the dangerous export situation and made a forecast. While exports to the UAE and Hong Kong (mostly gold) are soaring, exports to other countries, including Russia, are declining. This 🤒🟨♻️ “gold rush” masks the decline in Armenia’s real economy, trade turnover, and GDP. It has inflated GDP indicators, creating an illusion of economic growth where growth is small. In the first quarter of 2024, the Armenian government boasted an impressive 9.2% GDP growth. Our estimates showed that a staggering 4% of this growth was driven solely by the gold re-export “industry” (read more: 🌿🤨💎 The Precious Effect: Reasons for Economic Growth in 2024). After this publication, on October 20, this figure was revised to 6.6%. The main revision was a downgrade in the gold re-export “production” in GDP from 4 percentage points to 1.2 percentage points. This is not just a revision, but a conceptual change. From a seemingly upward trend, Armenia is now on the path to stagnation.

Chart 3.

The third chart shows a negative forecast. While overall exports seemingly soar upward at the expense of the re-export of precious metals and stones (HS Code 71), there is a decline across the export of all other goods. This difference is the reality of Armenia’s current economic illusion. The area between the red and blue lines in the chart reflects the share of precious stones and metals in total exports.

The sustainability of this golden profit is questionable at best. The growth of gold re-exports through Armenia is heavily driven by geopolitical circumstances, particularly Western sanctions against Russia. This is a temporary phenomenon driven by global economic realities that are already shifting.

Chart 4.

This chart shows the sharp increase in exports and imports of precious metals from November 2023 to April 2024. Pay attention to the recent months, which signals the end of Armenia’s “golden export era”.

The chart shows that in March 2024 alone, $1.4 billion worth of precious stones and metals were imported from Russia to Armenia, after which it took a sharp dive. In December, $310 million worth of gold was imported. From the peak point, the import of gold and other precious stones and metals dropped 4.5 times. As a result of recent legislative changes in Russia, the export duty on gold was abolished, after the introduction of which 88% of Russia’s gold exports passed through Armenia. The transit flow of gold is already decreasing. In recent months, Armenia’s export and GDP growth were based on this external, temporary, and artificial phenomenon, which puts the economy in a highly unstable state. It masks the decline of the real economy and distracts attention from the true economic situation and the need for economic changes.

While Armenia has ridden this golden wave, the development of sustainable, high value-added sectors that can ensure long-term economic stability is being ignored. The decline in exports to the traditional EAEU and EU markets is particularly concerning, as it may indicate a loss of competitiveness in sectors that were previously the pillars of Armenia’s economy.

The coming months will be crucial. As the rapid growth of gold re-exports fades, Armenia may face a harsh economic reality. The true state of the economy, which until now was hidden behind the glitter of gold, will become more apparent.

It is necessary to look beyond this “golden era” and start building an economy with a real production base that creates long-term and sustainable value added, which will not be based on the temporary and unsustainable external impulses that mainly provided Armenia’s temporary double-digit economic growth. It is necessary to build a resilient economy, which includes investments in education, promoting innovation, and creating a favorable environment for the growth of high-value sectors, as well as 🧮⏳🎲 the formation of an effective tax framework.

This analysis shows that Armenia stands at an important crossroads. Armenia’s “golden illusion” serves as a cautionary tale for developing economies. It highlights the danger of relying on temporary profits and the importance of creating a solid, diversified economic foundation. Along with recovering from the gold rush, Armenia’s real economic strength will be put to the test. The question remains open: when the gold dust settles, what will continue to shine in Armenia’s economy?