ARKA Armenia Weekly: Key events of the week — politics, economy and markets (September 21–27)

YEREVAN, September 28. /ARKA/. The ARKA agency presents a digest of the week's key events.

SUMMARY

The defining trend of the week was the strengthening of Armenia’s foreign economic and infrastructure agenda, alongside sustained high levels of domestic economic activity. Key areas of focus included TRIPP and the prospects for US investment, trade and transport links with the EU, Turkey, and China, as well as regional energy projects.

The overarching message for the business community is the gradual expansion of potential markets, transport routes, and investment channels. However, the ultimate outcome will depend on the practical implementation of infrastructure projects, the terms of access for Armenian goods to foreign markets, financing costs, and energy resilience.

POLITICS

The week began with the celebration of the 35th anniversary of Armenia's independence. In his address on September 21, Prime Minister Nikol Pashinyan described independence as "the most important thing we have." Beyond its symbolic significance, the authorities' rhetoric reaffirmed state sovereignty and institutional resilience as the foundation of the country's long-term strategy, encompassing economic autonomy and the diversification of external ties.

Regarding trade with Europe, the process shifted from preliminary decisions to the final approval of a new regime. On September 24, the EU Council officially approved temporary trade liberalization measures for Armenian goods; these measures entail the suspension of import duties on approximately 80% of Armenia's current exports to the EU for a period of two years. For businesses, this expands potential access to the European market—a development that takes on added significance given the restrictions some Armenian exporters are facing in trade with Russia.

The US side has stepped up its public support for TRIPP and its investment component. US Secretary of State Marco Rubio stated that Washington expects the project to advance and aims to stimulate American investment in Armenia. US President Donald Trump also affirmed the United States' readiness to build and invest in Armenia within the framework of TRIPP. For Yerevan, this elevates the project's significance—not merely as a transport initiative, but as a potential avenue for attracting American capital into infrastructure.

Regional acceptance of TRIPP remains a key condition for its implementation. Iranian Ambassador to Armenia Khalil Shirgholami stated that Tehran does not object to the project, provided two fundamental conditions are met: the preservation of Armenia’s sovereignty and territorial integrity, and the absence of any foreign military or security presence near the Iranian border. For the project, this establishes specific parameters that one of Armenia’s key neighbors will be monitoring closely.

Armenia and Turkey have also highlighted the economic dimension of the normalization process. During a meeting in New York, Nikol Pashinyan and Turkish President Recep Tayyip Erdoğan emphasized the need to boost trade and economic ties between their two countries. For the business community, the potential opening of additional trade and logistics channels could be highly significant; however, the economic impact will depend on the ongoing political process and practical decisions regarding the border and transport links.

The regional transport agenda is taking on a more concrete shape. Pashinyan announced the upcoming restoration of the Meghri and Yeraskh railway sections. Concurrently, the foreign ministers of Armenia and Azerbaijan—Ararat Mirzoyan and Jeyhun Bayramov—discussed the unblocking of economic and transport links, including trade and transit cooperation, during a meeting in New York. For the economy, these processes are significant primarily due to the prospect of expanding logistics routes, although the practical outcome will depend on future agreements and the operating conditions of these transport links.

Regarding relations with Russia, the Armenian authorities continue to emphasize the changing nature of the bilateral relationship. Pashinyan attributed this transformation to changes occurring within Armenia itself, as well as in Russia and the international arena. For the business community, the practical dimension of this process remains key—specifically the conditions governing trade, energy cooperation, transport connectivity, and access for Armenian goods to the Russian market.

ECONOMY AND MACRO SIGNALS

Armenia’s economic activity grew by 7.3% year-on-year in January–August, following a 7.7% rise over the first seven months. However, the economic structure remains uneven, and foreign trade data presents a mixed picture: total trade turnover increased by 3.2% to $13.27 billion, yet exports fell by 6.5% to $4.62 billion, while imports rose by 9.3% to $8.65 billion. Against this backdrop, inflation stood at 4.4% year-on-year in August, and rising producer prices continue to exert cost pressures. The overall outlook points to resilient domestic activity alongside persistent risks related to exports and prices.

The Asian Development Bank has maintained its economic growth forecast for Armenia at 5% for 2026 and 5.5% for 2027. At the same time, the bank expects the 2026 budget deficit to come in below the previously projected 4.5% of GDP, as revenue growth and lower capital expenditures improved the fiscal position during the first half of the year. For the economy, this implies a baseline scenario of steady growth and a relatively stable fiscal position, although the pace of capital project implementation remains a key factor for medium-term dynamics.

The Eurasian Development Bank projects that the Central Bank of Armenia’s refinancing rate will hover around 7% by the end of 2026. This assessment is driven by accelerating inflation and rising underlying price pressures. For companies and households, such a scenario implies that the cost of borrowing will remain relatively high, while investors will need to pay close attention to upcoming inflation data and signals from the Central Bank. Armenia and China have signed an agreement on international road transport. The document establishes the legal framework for direct freight and passenger road transport between the two countries and aims to streamline transport cooperation. For Armenian businesses, the agreement expands the range of potential logistics options for trade with one of the world's largest markets and aligns with a broader strategy to diversify foreign trade routes.

BUSINESS AND CORPORATE SECTOR

The export sector is receiving additional state support. The government plans to allocate approximately AMD 4.52 billion to compensate agricultural exporters for August. Amid export restrictions and shifting supply routes, the program serves as a tool helping producers adapt to new markets and higher logistics costs.

A new digital player is entering Armenia’s passenger transport market. Wildberries has launched early access to its WB Taxi service in Yerevan, with plans to gradually expand its user base. For the local market, this signals intensified competition among digital aggregators and the continued expansion of major tech ecosystems into adjacent service sectors.

Infrastructure cooperation with the EBRD remains a key channel for long-term investment. Armenia’s Minister of Territorial Administration and Infrastructure, Davit Khudatyan, discussed projects in road construction, energy, transport, water management, and waste management with Elisabetta Falcetti, the EBRD’s Managing Director for Turkey and the Caucasus. For the business community, this underscores the enduring importance of international financing in the infrastructure and corporate investment agenda.

The energy sector is entering a phase where the next major investment model is being determined. Pashinyan stated that Armenia is negotiating with the US, Russia, China, France, and South Korea regarding the construction of a new nuclear power plant. At the same time, the authorities identify the development of energy storage systems as a key prerequisite for the further expansion of solar power generation. For the economy, the choice of technology for the new nuclear power plant and the development of storage systems will shape a significant portion of the country's energy investment policy for decades to come.

MARKETS AND FINANCE

Regional energy integration has gained fresh momentum. Representatives from Armenia, Azerbaijan, and Georgia discussed prospects for linking their three countries' power grids with Turkey's energy system. For Armenia, the potential development of interconnections could expand cross-border electricity trade opportunities, enhance grid flexibility, and create further conditions for the growth of renewable energy generation.

Access to the Russian market for Armenian producers remains a key foreign trade risk. Rosselkhoznadzor announced the reasons for maintaining restrictions on fish and dairy imports from Armenia, citing non-compliance with Russian and Eurasian regulatory standards. For producers, this situation necessitates addressing regulatory issues while simultaneously underscoring the importance of diversifying export markets.

Energy diversification remains both an economic and a market issue. Authorities have reiterated their intention to reduce reliance on a single gas supply route. On September 25, Russian natural gas supplies to Armenia resumed following a temporary suspension. Gas supply conditions impact the economy through energy costs, production expenses, and inflation; consequently, route reliability and gas prices remain critical external factors for businesses.

Financial services continue to undergo digitalization. Rate.am and IDBank have launched the Rate.Trading platform, enabling individuals and legal entities to select available currency exchange terms or propose their own transaction rates. For the market, this reflects the gradual development of digital infrastructure for currency transactions and increasing competition within the financial services sector.

Armenia’s tourism connectivity continues to expand. Armenia and Montenegro have agreed to foster cooperation in the tourism sector, including the exchange of expertise and the promotion of tourist destinations. At the same time, Wizz Air plans to increase the frequency of flights between Yerevan and Prague to five per week. For the tourism sector, the expansion of international air links makes Armenia more accessible to European travelers and creates additional opportunities for the growth of inbound tourism and related services.

WHAT THIS MEANS

•           External economic diversification is becoming a central theme.

•           Regional infrastructure is gradually emerging as an economic factor.

•           Economic growth remains high, though export dynamics and inflation are creating a more complex macroeconomic picture.

•           Market diversification is taking on practical importance amidst ongoing restrictions on certain categories of Armenian exports to Russia.

•           Tourism, air connectivity, and digital services remain additional sources of growth for the service sector and strengthen the economy's international integration.

RISKS THIS WEEK

•           Investors will be watching for further details regarding TRIPP.

•           The practical impact of European trade preferences will depend on the ability of Armenian producers to meet EU requirements, reconfigure logistics, and scale up supplies to the European market.

•           Persistent restrictions on fish and dairy exports to Russia may continue to affect specific producers.

•           Inflationary trends remain a key domestic financial risk.

•           The development of regional transport and energy projects depends on political agreements, infrastructure interoperability, and the volume of required investment; consequently, their economic impact will materialize gradually.

•           Energy markets remain sensitive to the reliability of gas supplies, while plans to integrate power grids and build a new nuclear power plant require significant investment and long-term solutions.