In January-September 2022, the net inflow of money to Armenia was about $1.8 billion.
According to experts, this decline shows that the positive influence of the influx of Russians and their money on the economy of Armenia after Russia’s invasion of Ukraine in February 2022 is weakening.
“Demand-driven economic growth was also at the expense of the tripling of remittances, but this has become less of a factor, and, unfortunately, predictions about that are coming true and now the opposite is happening,” said Tadevos Avetisian, a member of the opposition Hayastan faction in the Armenian parliament.
Avetisian also said last year that those flows had external reasons and were not the result of the government’s activities, a view not entirely shared by Armenian officials.
According to the economist, the money that rapidly flow in also tend to rapidly flow out. “Now we are already at this stage, and this outflow of money puts stress on the economic processes as well,” he said.
According to the data of the Central Bank, money inflows to Armenia increased significantly in April 2022, some two months after Russia’s invasion of Ukraine that triggered a war that still continues between the two countries today.
It was during that period that the influx of Russians fleeing Western sanctions, reprisals or later the military draft began.
The net amount of private remittances to Armenia was steadily increasing for a year, but began to show an opposite trend since March of this year when more money started to flow out of Armenia.
And although the amount of money sent from abroad continues to be relatively large, the amount of funds leaving Armenia has increased significantly. Of the nearly $4,3 million that entered Armenia in the form of private remittances in January-September 2023, some $3 billion have already left. In the same period of 2022, almost twice less, $1.7 billion, left Armenia.
According to Avetisian, last year’s large cash inflow was mostly not capitalized in Armenia, the money was not turned into investments and remained on bank accounts. Now, he said, this money is leaving.
“To put it figuratively, that money came to Armenia and hid here for a while, and now it is leaving Armenia due to new geopolitical realities. In other words, the hot money effect is when people withdraw their capitals from a country where there is a possibility of a military conflict,” the economist said.
Statistics shows that the lion’s share of the outflow of money from Armenia goes to Russia and the United States. This year people in Armenia have already wired half a billion dollars in private remittances to Russia, almost twice as much as in the same period of 2022. A total of $323 million was transferred to the United States during nine months, which is by nearly 60 percent more than last year.
According to economist Suren Parsian, in order to keep the money in Armenia, first a favorable investment environment should be created to attract those who have money so that they do not look for options in other countries.
“We must have a developed stock exchange where people can, for example, buy shares, bonds, and also have the opportunity to start a business in Armenia. There should be such an environment so that they can implement their ideas and projects here,” Parsian said.
Acknowledging external factors behind the influx of money into Armenia in 2022, the Armenian government has not shared the opposition’s view that it was entirely due to those factors that people came and brought their money to the country. Officials have pointed to efforts of the Armenian government to create an appropriate climate and business opportunities in Armenia.
At a weekly cabinet session on Thursday Armenian Prime Minister Nikol Pashinian touted his government’s success in setting a new record in terms of registered jobs in the country.
Pashinian said that around 183,000 new jobs have been created in Armenia, a country with a population of some 3 million people, since he first became prime minister in May 2018. The current number of registered jobs in Armenia, he said, stands at 730,000.