Re-exports, migration and a strong dram

Armenia's economy is small and open, and its output and exchange rate depend heavily on Russia, with remittances, trade and tourism all tied to its neighbour. The Central Bank of Armenia targets inflation, with a floating dram, and after the 2020 war over Nagorno-Karabakh and the pandemic, the Russian invasion of Ukraine in 2022 brought a large inflow of people, capital and re-exports from Russia. GDP growth rose to more than 12 percent in 2022, and the dram appreciated strongly against the dollar as foreign currency poured into the country. The central bank raised its policy rate in 2021 and 2022 to contain inflation during the shock and later lowered it as prices stabilised. A growth rate that is high because of an unusual inflow of money and trade is not the same as sustained productivity growth, which is why the 2022 peak should be read with caution.