Geopolitical tailwinds lift Armenia’s external accounts

CAUCASUS / CENTRAL ASIA - In Brief 10 Jul 2026 by Ivan Tchakarov

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While Kyrgyzstan reported its full-year 2025 BoP data only last week, the rest of the CCA region already released their external accounts for the first quarter of 2026 over the course of the past week. I generally prefer to comment on them in a single post, but this time around I have decided to write short separate notes analyzing individual country BoPs as, in my opinion, the external accounts encapsulate in a very useful and succinct way the key investor themes for the economies. Today I start with Armenia as I present one country's BoP per day day. As far as Armenia is concerned, the key conclusion is that it has benefited from a geopolitics-driven improvement in sentiment, related to the advancing peace process with Azerbaijan, which has generated strong inflows on the financial account that have more than offset the widest CA deficit in the region. My baseline assumption is that this particular BoP structure is likely to persist as Pashinyan continues Yerevan's drift away from Moscow. In fact, pressures on the CA may intensify on Moscow restrictions on Armenian exports, but financial inflows are likely to remain robust, including because of EU's desire to lend a helping hand to Armenia.The CA posted a large 12.3 percent of GDP deficit in 1Q26. There is, of course, the usual seasonality in the data, with the first quarter being the worst and the third one, when tourist season is at its peak, the strongest (Graph 1). Hence, it was chiefly the large trade gap, being in turn driven by the still robust pace of economic growth, that generated the CA deficit. It was only partly offset by the surplus on the services balance. What stands out is that the 12.3 percent of GD...