Armenia’s current economy reminiscent of 2009 crisis

By: Mushvig Mehdiyev

Armenia’s hard-pressed economic indicators remain a sour point for Yerevan as officials have yet to find a solution to the sinking of the country’s economy. So far the government has failed in keeping up with economic forecast.

In 2014, the gross domestic product in this former Soviet country grew by 3.4 percent, disproving the expected target announced by the government earlier last year. The figure also fell by 0.1 percent under the GDP growth rate registered in 2013, exposing a year-on-year economic downfall.

Under former Prime Minister Tigran Sargsyan’s tenure (he resigned in early April), the government set its 2014 economic growth target at 5.2 percent. Only a few months after Sargsyan resigned, the new PM, Hovik Abrahamyan had to lower such estimates to 4 percent, pointing to severe economic difficulties.

The Central Bank of Armenia which appeared a little more cautious than the government, actually calculated a growth of at 3.9 percent. The falling private remittances from Russia greatly affected the Bank’s forecast.

Meanwhile, Abrahamyan’s government had to reduce its economic growth target for this year based on several factors including financial delusion and severe export-import dis-balance. Moreover, while the state budget was developed based on a target of 4.1 percent GDP growth forecast, the Central Bank announced that in 2015 it will fluctuate between 0.4 percent and 2 percent range.

In view of such a lowering of economic expectation by both the Armenian government and international financial institutions, lowering the GDP growth outlook should not come as an unexpected surprise.

The International Monetary Fund lowered its growth forecast for Armenia in 2015 from 3.5 to 2.6 percent in early fall.

The major disappointing forecast for Armenia’s 2015 GDP growth came from the European Bank for Reconstruction and Development, which advised not to expect any economic growth in Armenia at all, linking it to the economic challenges which Russia currently faces.

The World Bank came up with a comparably “optimistic” prediction for Armenia’s economic growth in 2015, with an expected rise of 3.3 percent. But even the world’s top banker had to lower its expectation from an earlier forecast of 5 percent.

Hrant Bagratyan, a local economist and member of parliament, said “the transition from large production setup to a smaller manufacturing setup in the wake of an economic downturn could harm Armenia rather than benefit it.”

“I can say it has already happened. Newly applied funded pension system inflicted a very bad economic blow on Armenia’s GDP,” he noted.

Bagratyan expects the economic hassle to go on in Armenia given the dram’s unavoidable fall. Making remarks on Armenia’s integration into the Eurasian Economic Union, Bagratyan called it a wrong decision, reminding the lack of precaution of seeking appropriate solutions despite prior warnings on Russia’s economic crisis.

Meanwhile, 168 Zham, a local newspaper wrote that the Armenian government is having difficulties in meeting its short term financial obligations — salaries and loans repayment following a sharp fall in its export of wine and brandy.

“Brandy and wine export to foreign markets has almost stopped,” claimed the newspaper.

SOURCE: Azer News