The Statistics Committee of Armenia has published summary socio-economic data for January-June 2022, according to which economic activity for the 6 months of this year was 11.8 percent. This growth was mainly provided by construction, trade and services.

In January-June 2022, compared to the same period last year, the industrial sector grew by 5.8 percent, construction by 12.7 percent, trade by 10.7 percent and services by 26.9 percent. The modest growth of the industrial sector is conditioned by the termination of Teghut mine operation and decrease of export of non-resource products because of the dollar devaluation.

At first glance, it seems that double-digit growth is an unexpected and great achievement for the Armenian economy, but in fact it was caused by external factors, in particular, a temporary flow of Russian tourists and increased remittances, as well as high metal prices in the world market.

It should also be noted that the growth of the construction sector is due to an increase in asphalt paving, as well as the availability of mortgage apartments. Of course, the banking system is very interested in the growth of real estate prices. It is noteworthy that during this period, the public debt of the Republic of Armenia is growing in parallel. Specifically, in January-June 2022, the state debt grew by $706 million. It turns out that we finance asphalt projects at the expense of the debt, the economic efficiency of which is very low.

And the impressive growth in the service sector is due to growth in the financial system, catering, hospitality, and gambling. These two sectors are generally not export-oriented and cannot lead to qualitative changes in the economy. Consequently, they cannot contribute to improving the standard of living of the population. And it is not by chance that in the first half of 2022, the banking system tripled its net profit to 111 billion drams.

It is worth recalling that 2009 was the year of the largest recession in the years of Armenia's independence, 14.1 percent, which was caused by a sharp decline in the construction sector. Of course, this year's growth is based on purely external factors, that is, this growth cannot be sustainable in the long term, especially given the high base effect, economic growth next year or even the maintenance of existing indicators is unlikely.

Notably, exports have increased by 36.3 percent this year. In a case where exporters and businessmen are regularly dissatisfied with the negative effects of the devaluation of the dollar. The composition and structure of exports have not yet been officially published, but it is clear that this growth was mainly due to the ore and raw materials industry.

At the same time, Armenia's foreign trade balance has deepened due to a 48.7 percent increase in imports, which means that Armenia's economy imports more than it exports. There is no doubt that the increase in imports was substantially affected by the devaluation of the dollar: the increase in imports is detrimental to local producers, forcing them out of the domestic market as well.

Comparing the figures of a modest 5.8 percent growth in the industrial sector with double-digit growth in imports and exports, we can assume that Armenia has a certain amount of re-exports, that is, under the war of economic sanctions, some goods under the ban were imported into Armenia and then exported to other countries. There was simply a turnover of money.

Recall that in June 2022 compared to June last year, prices only for food increased by 17.4 percent. In countries with a high poverty rate of 27 percent, such as Armenia, people spend 70-80 percent of their income solely on food, which means that the number of undernourished people in Armenia will continue to grow.

To summarize, Armenia's temporary economic growth will not lead to qualitative changes or higher living standards, but will disappear like a soap bubble as the influence of external factors wears off.

Aram Achemian