Sharp reversal in financial and labor inflows into Armenia from Russia within next few years appears unlikely- S&P Global Ratings

YEREVAN, August 28. /ARKA/. A sharp reversal in financial and labor inflows into Armenia from Russia within the next few years appears unlikely, S&P Global Ratings said.

Firstly, the ongoing Russia-Ukraine war seems protracted and, even if a settlement is achieved, sanctions and stresses on the Russian economy are likely to linger. Secondly, anecdotal evidence from Russian emigrants suggests they have no immediate plans to return home from Armenia, and alternative destinations for them are limited.

Barring extreme scenarios--such as a new direct military conflict with Azerbaijan--we expect Armenia's economic growth prospects in the coming years to remain robust, with projected real-term growth of approximately 7.5% in 2023 and averaging 4.0% in 2024-2026.

Moreover, we anticipate that the country's external and government balance sheets will remain stronger than pre-war levels.

The agency says that as a result, migrant and capital inflows have propelled economic growth, with real GDP in Armenia increasing by 12.6% in 2022, and have narrowed Armenia's persistent fiscal and current account deficits. Financial inflows also resulted in a 22% appreciation of the Armenian dram against the U.S. dollar in 2022.

This substantial currency appreciation has helped to shrink the government debt stock in U.S. dollar terms. Tensions between Armenia and Azerbaijan over the disputed region of Nagorno-Karabakh have also reduced, with a shaky peace deal so far holding up.

According to the Central Bank of Armenia, remittances from the Russian Federation in the first six months of this year amounted to $2.1 billion against $1.1 billion in the same period last year, almost doubling in size

Armenian Economy Minister Vahan Kerobyan said earlier that more than 110,000 foreign nationals have moved to Armenia after the start of the Russian-Ukrainian conflict.-0-