OBSERVATION 4. Monetary System: The economy is fueled by loans, not by created value

When discussing economic activity, attention is often focused on production, exports, or the budget. However, one of the real driving forces of the economy is the credit system. It shows whether the economy is growing through investment or through debt.

The monetary data for January 2026 reveals an important trend: the credit market continues to grow, but the structure of that growth suggests that economic financing is increasingly shifting toward household consumption.

1. The total volume of loans continues to grow

In January 2026, the total volume of loans issued by the banking system amounted to 8.19 trillion drams, compared to 8.08 trillion drams in December 2025.

This means that in just one month, the loan portfolio increased by about 103 billion drams.

At first glance, this may appear to reflect growing economic activity. However, it is crucial to understand where these loans are being directed.

2. Household loans exceed productive loans

The structure of loans provided to residents in January 2026 shows the following: Loans to households: 3.52 trillion drams and loans to non-financial organizations: 1.27 trillion drams

This means that household debt in the economy is nearly three times larger than business borrowing.

In other words, the primary borrower in the financial system is not the business sector (the producer), but the consumer.

3. Money supply is decreasing, while debt continues to grow

At the same time, the money supply has slightly decreased.

In January 2026, the money supply amounted to 6.82 trillion drams, compared to 6.94 trillion drams in December 2025. This means that the amount of money circulating in the economy is shrinking, while credit obligations continue to increase.

This contradiction suggests that the financial system is sustaining economic activity mainly through credit expansion.

4. Interest rates remain high

In January 2026, the average interest rate on dram-denominated loans was 13.41%, while the average deposit rate was 7.85%.

This indicates that credit resources remain “expensive” for the economy.

Under such conditions, the real expansion of productive investment becomes difficult, while consumer lending continues to dominate.

5. The structure of deposits also signals caution

In January 2026, deposits attracted from households in the banking system amounted to 3.37 trillion drams, a decrease of 0.7% compared to the previous month.

This means that two things are happening simultaneously: deposit growth is slowing, while credit obligations continue to rise.

This suggests that the expansion of the financial system is driven more by debt activity than by rapid growth in savings.

Conclusion

The monetary data highlights an important structural characteristic of Armenia’s economy.

Economic financing continues to rely on:

1. consumer loans

2. mortgage debt

3. household lending

At the same time, business borrowing remains relatively low.

In such a structure, the financial system is gradually transforming from a mechanism for financing production into a system for financing consumption.

The key question is simple:

Can an economy achieve long-term development if it grows not through created value, but through increasing debt that sustains consumer spending?