ARKA Armenia Weekly: Key Events of the Week: Politics, Economy, and Markets (July 27 – August 2)

YEREVAN, August 3. /ARKA/. ARKA News Agency presents a digest of the week's key events.

SUMMARY

The week was marked by heightened foreign trade risks, continued high domestic economic activity, and Armenia's transition to a new political cycle.

Macroeconomic data indicate robust domestic demand. However, exports declined while imports grew, reinforcing the importance of external balance and market diversification.

In the banking sector, deposit and loan portfolios continue to grow. The infrastructure agenda is shifting toward water projects, which should improve agricultural sustainability and reduce energy costs for irrigation.

A separate challenge is the changing digital economy of the media market: the development of generative search is forcing Armenian media outlets and brands to reconsider their approaches to content distribution, relationships with technology platforms, and direct interaction with audiences. The overall message of the week is that the economy maintains its internal momentum, but for businesses, the importance of sustainable export channels, infrastructure investment, regulatory quality, and adaptation to new technological models is growing.

POLITICS

Armenian Prime Minister Nikol Pashinyan appealed to Russian President Vladimir Putin to take measures to resolve the issue of restrictions on the export of goods of Armenian origin to the Russian market. Pashinyan stated that the current restrictions contradict the legal framework of bilateral relations and the norms of the Eurasian Economic Union, confirming Yerevan's readiness to resolve contentious issues through partnership dialogue.

This issue has direct implications for businesses: the restrictions affect a number of categories of food and agricultural products, as well as the transit of Armenian products through Russian territory.

Armenia is interested in preserving the Eurasian Economic Union, stated Economy Minister Gevorg Papoyan. The statement followed the Prime Minister's criticism of the practical implementation of the provisions of the EAEU Treaty. The authorities do not yet consider the end of Eurasian integration as a baseline scenario, but they are demanding compliance with predictable trade rules. For companies, the main question remains not the formal existence of the free movement of goods regime, but its actual implementation.

The Russian side simultaneously strengthened its economic arguments surrounding a possible change in Armenia's integration course. Russian Minister of Economic Development Maxim Reshetnikov stated that replacing Armenian supplies would not create significant difficulties for the Russian market and expressed doubts about the possibility of maintaining comparable gas prices outside the EAEU. These signals point to an asymmetry of risks: the Russian market is capable of replacing certain categories of imports, while Armenian exporters will need time and additional investment to expand to alternative destinations.

On Sunday, August 2, the ninth National Assembly of Armenia, formed following the parliamentary elections of June 7, began its work in Yerevan. Following the parliament's opening, the government resigned in accordance with constitutional procedure. The president accepted the cabinet's resignation, after which Nikol Pashinyan was renominated by the parliamentary majority and appointed prime minister. For businesses, the main question will be the composition of the new cabinet's economic bloc and the continuity of tax, investment, and infrastructure policies. Candidate for Speaker of the Republic of Armenia Ruben Rubinyan stated that Armenia confirms its readiness to open the Armenian-Turkish border to third-country nationals and holders of diplomatic passports and expects Turkey to fulfill the relevant agreement. Implementation of this decision could create additional opportunities for tourism, transportation, and trade, although no specific timeframe has yet been set.

ECONOMY AND MACROSIGNALS

Economic activity in Armenia increased by 7.9% in January–June 2026 compared to the same period last year. This growth was driven primarily by construction, which increased by 24.5%, services by 11.1%, and industry by 10.8%. Meanwhile, agricultural production contracted by 11.9%. Amid strong domestic activity, foreign trade turnover decreased by 0.1% to $9.57 billion: exports fell by 6.7% to $3.43 billion, while imports increased by 4% to $6.14 billion. This indicates a divergence between domestic growth and foreign trade dynamics and increases the importance of export competitiveness.

The top 1,000 taxpayers in Armenia transferred over 1.109 trillion drams in taxes and customs duties to the state budget in the first half of the year—approximately 12.6% more than the previous year. Tax authorities collected 939.96 billion drams, and customs authorities collected 169.94 billion drams. The increase in revenues indicates an expansion of the nominal tax base and supports the budget's ability to finance infrastructure and social programs.

The World Bank forecasts Armenia's economic growth of 5.3% in 2026 and 5.1% in 2027. This more moderate forecast, compared to actual economic activity in the first half of the year, reflects expectations of a slowdown in the second half of the year and ongoing external uncertainty. Services, construction, and certain industrial sectors are expected to remain the main drivers.

The current account deficit remains a key macro-financial risk. According to former Finance Minister Vardan Aramyan, it has widened from approximately $85 million in 2022 to $2.6 billion by the end of 2025. A decline in exports coupled with an increase in imports could further increase the need for external financing. For markets, it matters whether the deficit will be covered primarily by direct investment and long-term capital or debt.

The government allocated 1.7 billion drams to extend the compensation program for exporters of certain greenhouse products in August. This measure supports producers during restrictions in traditional markets and the restructuring of logistics, but also highlights the dependence of the competitiveness of certain export routes on budgetary subsidies for transportation costs.

BUSINESS AND CORPORATE SECTOR

The South Caucasus Railway concession remains a separate issue in Armenian-Russian economic relations. Prime Minister Nikol Pashinyan stated that Armenia may reconsider the terms of providing resources and services to the Russian side that were previously free, and allowed for financial demands of up to $2 billion per year, including in the context of the railway. The Russian side, in turn, called the issue of additional payments based on a unilateral revision of concession obligations groundless. For businesses, the dispute has implications for freight transportation, tariffs, investment obligations, and the prospects for opening regional routes. The key signal will be the parties' ability to resolve differences without disrupting the railway's operational stability.

The Anti-Corruption Court granted the Prosecutor General's Office's petition to transfer the management and security of the shares of the Yerevan Brandy-Wine-Vodka Factory to the state. The Ministry of Economy has been granted authority to manage the asset. For the company, the primary concern is the continuity of production and the fulfillment of obligations to employees, suppliers, and distributors. For the investment market, this situation highlights the importance of a transparent management model for assets transferred to the state through legal proceedings.

A state administrator has been appointed at the Ararat Cement plant. The company's economic significance extends beyond the corporate dispute: the cement industry is linked to construction, infrastructure projects, employment, and the cost of materials. For the market, it is important that temporary management does not lead to a reduction in production or investment activity.

Sales of Armenian cognac and still wine in Russia in the first half of the year decreased by 11-12% compared to the same period last year. The dynamics show that exporters' difficulties are related to both administrative restrictions and changes in demand and the competitive environment. Manufacturers will need to expand their supply geography and strengthen their brands in alternative markets.

MARKETS AND FINANCE

Armenia's capital market—especially bonds—will continue to develop rapidly and could become an additional driver of economic growth, stated Arman Barseghyan, Director of Retail Banking at Ameriabank. According to him, the key conditions for capital market development include increased economic transparency, the gradual emergence of businesses from the shadow economy, and improved corporate reporting. For companies, the bond market offers an alternative to traditional bank lending, while for investors, it expands the choice of dram and foreign currency assets.

Approximately 650 million drams are planned for the final completion of the Vedi Reservoir project in 2026. Its operation is expected to ensure gravity irrigation of approximately 3,220 hectares of land, reduce water loss, and save approximately 19 million kWh of electricity annually. At the same time, authorities are preparing to begin construction of the Kasakh, Lichk, and Yelpin reservoirs by the end of the year, and are also working on 15 other projects. For the economy, these investments mean increased agricultural sustainability, reduced dependence on energy-intensive irrigation, and more efficient water resource management.

Media Market

The spread of generative search engines is changing the principles of search engine optimization, corporate communications, and media promotion, notes Konstantin Petrosov, director of the ARKA agency, in an opinion piece. According to him, to appear in results from ChatGPT, Gemini, Claude, and other systems, it is no longer enough for brands to rank high in traditional search results. Source credibility, publication consistency, data structure, expertize, and verifiability of information are becoming more important. For Armenian companies and media outlets, this means a shift from the classic SEO model to building a digital reputation and presence in authoritative sources that AI systems can rely on.

At the same time, Petrosov notes, the conflict between publishers and Google over the use of materials in generative search is intensifying. The new model allows users to receive a ready-made answer without having to visit the original source's website, which can reduce search traffic and advertising revenue for editorial offices. While major international publishers are considering restrictions on search and AI bots, a more realistic strategy for Armenian media remains diversification of distribution channels, developing direct relationships with audiences, and investing in unique local content. The main market risk is that technology platforms are increasingly playing a role in audience distribution and the economic value of journalistic output.

WHAT DOES THIS MEAN?

• Economic activity remains strong, but declining exports and rising imports are exacerbating external imbalances.

• Restrictions on the Russian market have become a systemic risk for Armenian exporters and have become the subject of high-level negotiations.

• The inauguration of the new parliament opens a new political cycle, and businesses will evaluate the continuity of economic policy.

• Increased tax revenues support budget stability, but income remains concentrated in the largest companies and industries.

• The banking sector continues to expand deposits and lending, and rating decisions indicate an improving operating environment.

• Investments in reservoirs form a long-term foundation for increasing agricultural sustainability and reducing energy costs. • The development of generative search is changing the economics of the media market: trust in the source, direct access to the audience, and unique content are becoming more important than dependence on traditional search results.

RISKS OF THE CURRENT WEEK

• Investors will be monitoring the formation of the new government and the composition of its economic bloc.

• Restrictions on Russian trade may affect additional categories of Armenian products.

• A decline in exports amid rising imports could increase pressure on the trade balance and current account.

• Disagreements over the Eurasian Economic Union, gas prices, and the railway concession could impact business expectations.

• Expanding state control of large assets could increase attention to property protection and the quality of corporate governance.

• Export subsidies support producers in the short term, but are no substitute for sustainable access to new markets.