Diamond trade comeback fuels Armenia’s 2025 growth
I’ve developed something of a habit over the past few years: comparing the economic performance of Armenia and Georgia. It’s a useful lens, not least because both economies were propelled by remarkably similar forces in 2022-2023. Both countries posted blistering 10% average GDP growth in those two years. And in both cases, the drivers were largely the same: the positive spillovers from the Russia-Ukraine war. Think net monetary inflows, relocation of IT and finance activity, and trade intermediation. Armenia’s now-famous “diamond trade” boom sat at the centre of this story, with Georgia benefiting handsomely as a logistics and financial conduit along the same corridor.
Where things diverged was 2024. Georgia pulled ahead, powered in large part by targeted fiscal expansion as the political cycle gathered momentum. My working assumption at the time was straightforward: Armenia would eventually follow suit — ramp up spending ahead of the June 2026 parliamentary elections and narrow the growth gap with Tbilisi. Armenia did indeed deliver strong growth in 2025 at 7.2%, albeit not for the reason I expected.
What makes Armenia’s 7.2% growth in 2025 particularly interesting is that it surprised almost everyone — including the Armenian authorities themselves. The Central Bank of Armenia was still projecting 5.9% as late as mid-December while the economy minister suggested just above 6% only weeks before the official release. Yet the final number came in materially higher. So what happened? The answer, in my view — and in the data — is simple: the diamonds came back.
Armenia’s “diamond corridor”
About two years ago, I documented the explosive rise of Armenia’s diamond trade along the Russia-Armenia-UAE/Hong Kong/China axis. The mechanism was straightforward:
- EU/G7 sanctions restricted direct imports of Russian diamonds.
- Rough stones were shipped to Armenia.
- Armenia’s Soviet-legacy polishing industry processed them.
- Polished stones were re-exported to Asian hubs (UAE, China, Hong Kong) — and ultimately, quite possibly, onward to Western markets.
By mid-2024, this phenomenon appeared to fade. Precious-stone trade shares normalised, and I argued at the time that the diamond boom’s contribution to Armenian activity had largely dissipated by 2025. That turned out to be premature.
The 4Q25 comeback
The newly released data show that the diamond trade re-emerged — abruptly — in the final quarter of 2025. That timing probably explains why policymakers were caught off guard. GDP growth accelerated sharply: from 5.9% year on year average in the first three quarters to 9.8% y/y in 4Q25. The trigger was familiar: a renewed surge in trade dominated by what Armstat calls “precious stones, metals and goods thereof”.
This category had already exploded in late-2023/early-2024, at one point accounting for 80-90% of Armenia’s imports and exports. It then normalised through mid-2024 and most of 2025 — until the late-year rebound. The 4Q25 increase did not match the 2024 extremes, but it was unmistakable. Imports from Russia jumped again — almost entirely precious stones—while exports of precious stones surged to the UAE, Hong Kong and China.
As before, the pattern strongly indicates Russian-origin rough diamonds processed in Armenia and re-exported to Asia. In other words: the same corridor, revived.
The hidden growth driver
On an annual basis, Armenia’s 2025 growth drivers looked conventional enough, including construction, IT, finance/insurance and real estate. Together they accounted for roughly 63% of total GDP growth. But that misses the key story in the final quarter — when growth peaked. In 4Q25, those four sectors contributed only about half of growth, but the single largest single contributor was manufacturing — specifically, precious-stone processing.
Manufacturing added 2.2 percentage points to 4Q25 GDP growth, the biggest sectoral impact in the quarter. This is striking because manufacturing’s annual contribution was zero — it had actually subtracted from growth earlier in the year. The late-year surge merely offset earlier weakness, leaving the annual total unchanged but dramatically boosting the final quarter.
To put it simply, it can then be argued that the diamond trade added about 2.2 percentage points to Armenia’s 2025 GDP growth. Without it, 4Q25 growth would have been at most 7.6%, the full-year growth at 6.4% (and the economy minister’s early February forecast right on point). In reality, annual growth would likely have been even lower still, since other sectors benefited from the trade spillovers of peripatetic diamonds.
From diamonds to pensions
The political timing is notable. GDP data were released on February 20 and just a few days later, on February 25, Prime Minister Nikol Pashinyan announced a major pension increase effective April 1, 2026. He explicitly linked the decision to the stronger-than-expected growth, noting that economic performance had exceeded both government and international forecasts and that citizens should also enjoy the benefits of growth outperformance. This is a clear departure from the late-2025 narrative, when the government emphasised the lack of fiscal space and relied on cashback supplements to top up pensions instead of a major pension increase. With 660,000 pensioners and an average increase of AMD8,000-10,000, I estimate the annual fiscal cost to be in the range of AMD63bn-79bn (0.6-0.7% of GDP). It is hard to avoid the conclusion that the diamond rebound created unforeseen fiscal space at a politically opportune time for Pashinyan ahead of the 2026 elections
One-off or renewed cycle?
Whether this is a temporary spike or the start of another diamond cycle remains unclear. The scale is smaller than in 2024, and the durability of sanctions-circumvention trade channels is inherently uncertain. But one point seems safe: the diamonds have returned — just in time for Armenia’s political cycle. And Pashinyan has never been one to miss an election-related opportunity.
Ivan Tchakarov is partner for the Caucasus and Central Asia at GlobalSource Partners.
