In a report released this week, the CBA said that the country’s economy now faces “high uncertainty and significant risks.” It predicted sizable drops in Armenian exports to Russia and multimillion-dollar remittances from Armenians working there.
Russia is Armenia’s number one trading partner and export market, with bilateral trade totaling $2.6 billion last year. The Russian ruble has depreciated sharply since the start of the assault on Ukraine on February 24.
The CBA report says that Russian-owned companies operating in Armenia will experience major “difficulties and disruptions” because of the crippling sanctions against Russia.
One such company, the Teghut mining giant, suspended operations on March 14. It employs 1,100 people and was Armenia’s tenth largest corporate taxpayer in 2021.
Armenia - A newly constructed ore-processing plant at the Teghut copper mine, 20Dec2014.
The CBA already cut its economic growth forecast for 2022 from 5.3 percent to 1.6 percent in mid-March. A senior official from the International Monetary Fund forecast a virtually identical growth rate.
The CBA also raised its benchmark interest rate by 1.25 percentage points, citing increased inflationary pressures on the Armenian economy.
“A high inflationary environment is expected to persist in the months to come,” reads the bank’s latest report.
Food prices in the country went up by an average of almost 13 percent last year, reflecting a global trend. Prime Minister Nikol Pashinian warned on March 3 that fallout from the conflict in Ukraine will push them up further.
Armenia imports a large part of its wheat, cooking oil and other basic foodstuffs from Russia. Many of its citizens are already struggling to cope with the increased cost of living.
“What should pensioners do?” said one middle-aged woman in Yerevan. “Things are getting worse by the day.”