World Bank warns prolonged Russian restrictions could spill beyond trade

By Siranush Adamyan

The World Bank has warned that if Russia maintains and expands its restrictions on Armenian agricultural and food exports, the impact could extend well beyond trade, affecting economic growth, inflation and social conditions in Armenia.

In its July monthly economic update, the World Bank said Armenia's economy continues to outperform expectations, but recent political developments with Russia have raised concerns and prompted government support measures for exporters.

Also read: Armenia faces sweeping Russian import restrictions across industries

"Should the ban continue and widen without mitigation measures, the negative impacts could spill beyond trade and affect growth, prices and social conditions," the report said.

According to the World Bank, Russia has gradually expanded its ban on Armenian agricultural and food products since late April. In response, the Armenian government has introduced subsidies to help exporters offset transport and customs costs when shipping goods to alternative markets, including the European Union.

The warning comes as exports to Russia fell 15% year-on-year in May. Overall exports declined 11.5% in the month, while imports dropped 1.6%. For the January-May period, exports were down 3.7% and imports rose 2.2%, widening Armenia's trade deficit to the equivalent of 7% of projected annual GDP.

The report attributes much of the export decline to lower re-exports of precious and semi-precious stones. Excluding those products, total exports increased 18% year-on-year, driven largely by mineral exports, which surged 89%.

The Central Bank of Armenia kept its policy rate unchanged at 6.5% in June, citing two opposing pressures: strong domestic demand and rising inflation expectations on one hand, and potential disinflationary risks stemming from export challenges in Russia on the other.

Despite these risks, Armenia's economy remained resilient. Economic activity expanded 11.7% year-on-year in May, bringing growth for the first five months of 2026 to 8%, outperforming earlier projections. The expansion was driven by tourism, hospitality, transport, information technology, construction and mining. More than one million tourists visited Armenia in the first half of the year, a 14.8% increase from a year earlier, with visitors from Russia accounting for about 40% of arrivals.

Inflation accelerated to 5.1% in June from 4.2% in May, mainly because of rising food prices. Food and non-alcoholic beverages accounted for nearly two-thirds of overall inflation, the report said.

The World Bank also noted that non-commercial money transfers remained strong, increasing 30.2% year-on-year in May. About 61% of those inflows came from Russia, helping support domestic demand, banking-sector liquidity and the Armenian dram.

Also read: Armenia cuts fuel reliance, braces for possible gas price hike, central bank official says