Country of preferred choice: departure of Russian relocators will upset Armenia

The Armenian economy has significantly reduced its turnover in comparison with the record figure of 2022, when, under the influence of the factor of movement of human resources and capital from In Russia, the republic's GDP showed double—digit growth rates - 12.6%. Last year it grew by 8.7%, according to the results of the current 7.5% are expected.

The forecasts for next year are much more modest. The Eurasian Development Bank expects Armenia's GDP to grow by 4.2% in 2025, the World Bank — by 4.9%, the European Bank for Reconstruction and Development — by 4.8%.

One of the symptoms of the slowdown in the Armenian economy is the cooling of the local real estate market, the overheating of which was largely due to the relocation of Russians.

According to the latest calculations of the Statistical Committee of the country, in the structure of its The GDP share of the construction sector is still showing steady growth. So, if in the first quarter of the year construction provided 3.7% of GDP, then in the second this figure reached 5.7%. However, there is a puzzling nuance — the interest of foreign investors in the construction industry of Armenia has significantly decreased. Compared to the first six months of last year, the volume of construction of new facilities at the expense of foreign investments in the 1st half of 2024 actually collapsed, immediately decreasing by 61.7%.

The loss of interest can also be traced in the real estate market. According to the State Department of the republic, in the period January — June 2024, foreigners in Armenia purchased 660 units of real estate, most of which are apartments and residential buildings. Meanwhile, they have sold 1,145 units of real estate. Thus, sales of square meters of housing and commercial real estate almost doubled their purchase by non-citizens of the country.

Among Russians, the ratio of purchase and sale amounted to 259 apartments and houses to 476, respectively. In total, Russian citizens sold 859 units of various Armenian real estate during the reporting period, while they purchased 411.

Commentators in Yerevan associates this trend with the increasing outflow of relocators from the Transcaucasian republic. Nikol Pashinyan's government recognized their impact on record GDP growth rates not only in the EAEU, but also far beyond its borders back in 2022 and tried to keep this growth driver as long as possible. However, many Russians who moved to Armenia after the start of the special military operation did not stay here.

It should be recalled that in 2022, the Armenian authorities predicted economic growth in the country of 7%, but in fact it amounted to the aforementioned 12.6%. In addition to the consumption of goods and services, relocators also began to transport enterprises (IT and other industries) here. Factors related to Russia increased Armenia's GDP by 5-6%, stated in the government reports of the republic.

891 companies were registered by Russian citizens in Armenia last year, according to the data of the Ministry of Justice of the Republic at the end of January 2024. In addition, in 2023, 3857 citizens of the Russian Federation registered as individual entrepreneurs (IP), of which 221 were later removed from the register. In 2021, before the start of SMO and the introduction of unprecedented anti—Russian sanctions by the West, the number of companies opened by Russians in Armenia was only 225 (2 liquidated), IP - 201 (21 removed from the register).

At the expense of Russians, remittances from individuals to Armenia have increased sharply: their volume amounted to $ 2.6 billion and, compared with 2021, has almost tripled. But already in October 2023, there was a decrease in transfers to the republic from Russians by about 40% compared to the same period last year.

Russian citizens have transferred more than $2 billion to Armenia. Such data for eight months of 2023 was provided by the rating agency S&P (headquartered in New York). Although the Transcaucasian member of the EAEU most often acted as a transit point for this money, they still supported local banks, American analysts stated.

A decrease in the volume of remittances to Armenia may significantly affect the state of the country's economy, economists warn. According to official statistics, the volume of transfers through banks to Armenia has significantly decreased by the middle of this year. In the period from January to May 2023, $ 2.48 billion was transferred, and in the same period of 2024 — $2.088 billion. This is mainly due to a more than 20% decline in transfers from Russia. At the same time, transfers from the USA increased by 11%, from the United Arab Emirates — by 7%. Nevertheless, the volume of transfers from the USA is still significantly inferior to Russian.

Pashinyan's cabinet had particularly rosy expectations about the IT sector, 70% of whose representatives who moved from the Russian Federation, according to data for 2023, settled in Armenia. Now, as can be assumed from the above-mentioned current data of the Armenian real estate market, this layer of relocators, which is considered one of the most solvent, is beginning to revise its plans.

Moved from Large IT companies paid three times more taxes to Russia in Armenia in 2023 than in 2022. Armenia was noticeably different from Georgia in this sense. The latter was more often chosen by representatives of creative industries (artists, designers, journalists), but programmers preferred Armenia. In particular, because many IT companies have opened offices here, which chose this country because of the relatively favorable tax regime, the situation with payments that was quite comfortable at that time (including from Russia) and a predictable scenario for obtaining a residence permit. The situation began to change by the end of last year. Thus, under the pressure of Western "sanctioners", Armenian banks were forced to reconsider some business relationships with Russian partners. This was clearly manifested in the refusal to service Mir payment system cards on the local market.

In 2022, Armenia became one of the so—called countries of first choice - many people came here to look around and only then decide on a place of permanent residence. Entire companies, especially technology companies, have also moved. The first months of the influx of Russians to Armenia gave the local authorities hope that they would stay here for a relatively long time. In any case — until the end of SMO.

However, all the countries of the first choice already in 2023 faced an outflow of Russians, which experts called quite logical — the time has come for more informed decisions. The first impulse to leave due to certain circumstances gradually transformed into a cold calculation, which is often not in favor of today's Armenia. And the matter is far from the factor of the Armenian-Russian relations that have noticeably worsened after the start of SMO. Such mutual tension and the resulting distrust is almost completely limited to the state sphere of relations, and it has not generally spread to contacts at the level of ordinary citizens of the two countries. In addition, a significant part of Russians who have moved to Armenia are prone to political dissent and even distorted "patriotism", for which, for example, participation in anti-Russian actions near the building of the Russian Embassy in Armenia is issued. Yerevan.

The Russians' decision to return to their homeland or continue searching for new relocation sites outside Armenia is primarily economically motivated. Especially if their relocation was due to commercial considerations, and not domestic issues or a rush of dissidence.

In this regard, it is enough to recall the very modest size of the Armenian market. This is especially true for those who were going to provide services to local companies and citizens. The entire population of Armenia is four times smaller than the population of Moscow. And the bulk of the relocators to the republic were from the two largest Russian cities — Moscow and St. Petersburg.

The Armenian authorities estimated the relocation of Russians at its peak in 2022 at more than 100 thousand people. According to some Armenian experts, by the spring of 2024 there were from 55 thousand to 60 thousand citizens of the Russian Federation in the republic who had moved since the beginning of SMO. The remaining relocants make up about 2% of the total population of Armenia, which is quite noticeable, given that they live mainly in Yerevan, the number of inhabitants of which does not exceed 1.2 million. Thus, the newly arrived Russians make up about 5% of the population of the Armenian capital.

Some of them may stay for a long time, the other will immediately return to the Russian Federation as soon as the fighting in the SMO zone ends. Some more will migrate further in the foreseeable future, for example, to the UAE. In any case, the Armenian economy will have to go through its own path of conscious choice, ceasing to hope for a lasting effect of relocation.

One way or another, but the positive impact of relocation on the Armenian economy is beyond doubt. The broader positive impact of the presence of tens of thousands of Russians in Armenia is also noticeable — social and in the security sphere. Comparable to the number of Russians who arrived in the country and settled here after February 2022, the number of people moved to its territory from Nagorno-Karabakh in just a few days last September. According to official data, more than 108,000 Armenians fled the unrecognized republic at that time. This led to an increase in the burden on the expenditure items of the state budget, the Pashinyan government launched a number of programs for the integration of compatriots. Supported by the relocation, Armenia's financial stability still allows it to allocate quite impressive sums for the settlement of Karabakh Armenians.

As for the security sector, the economic activities of Russians and the taxes paid to them in the Transcaucasian republic contribute to strengthening its defense capability. Local authorities have initiated expensive programs of rearmament of the Armenian army, material and technical strengthening of the border with Azerbaijan with a length of about 1000 km. All this requires considerable financial resources and relocators from the Russian Federation, with the increase in Armenia's GDP provided by them, have become an important factor in increasing the republic's security level over the past two and a half years.