Page 27 - Caucasus Outlook 2025

5.2 Real economy – Armenia
5.2.1 Retail
The Armenian retail sector experienced moderate growth in 2024, with total sales increasing by 6.8% y/y to AMD3.2 trillion ($8.9bn) in November. This growth was supported by rising household incomes, a stronger Armenian dram and improved consumer confidence, reflecting broader economic stability. The main contributors to retail expansion were the food and beverages segment, which grew by 8.2%, and non-food items such as electronics and clothing, which recorded a 5.6% increase in sales.
E-commerce continued its upward trend, growing by 15% year on year, driven by increased internet penetration, the adoption of digital payment systems and a wider range of products available online. Cross-border e-commerce also expanded, supported by improved logistics and trade agreements that made it easier to import goods. Online sales accounted for 12% of total retail sales, up from 10% in 2023.
Traditional bricks-and-mortar retail saw a 4.5% increase in sales, with major shopping centres and retail chains reporting higher footfall, particularly during seasonal sales events. However, smaller retailers faced challenges related to rising rental costs and competition from larger chains and online platforms.
5.2.2 Banks
The Armenian banking sector grew by 9.3% y/y in 2024, reaching AMD10.4 trillion ($24.4bn) by November, demonstrating resilience and stability. This growth was underpinned by robust credit expansion, strong deposit inflows and improvements in asset quality. Loans to the private sector grew by 11.5%, driven by increased demand for corporate financing, particularly in the manufacturing, agriculture and IT sectors, as well as retail loans for housing and consumption.
Deposits grew by 8.7% y/y, reflecting improved household savings amid economic stability. Foreign currency deposits declined slightly by 2.3% due to the strengthening of the Armenian dram, while local currency deposits grew by 12.9%, reflecting increased confidence in the domestic currency. The loan-to-deposit ratio stood at a healthy 78.5%, indicating balanced growth in lending and funding.
The profitability of the banking sector also improved, with return on assets (ROA) rising to 1.7% from 1.4% a year earlier, and return on equity (ROE) reaching 15.2% from 13.8% a year earlier. Non-performing loans (NPLs) as a share of total loans declined to 3.8% from 4.5% in 2023, reflecting strengthened risk management practices and a recovering economy.
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