Armenia: Good intentions and grim reality

Armenia: Good intentions and grim reality


The poor situation in Greece, which is the symbol of a new wave of the global economic crisis, is the reason for the unprecedented fall of price indicators on the leading markets of Europe and the world. The new wave of the crisis is being discussed by everyone, including representatives of countries with fairly stable and strong economies. However, it isn’t being discussed in Armenia, the GDP of which decreased by 14% in 2009, leading the republic to first place in the CIS and second in the world.

It is interesting that it's only the authorities who don’t notice the new wave of crisis. In 2009 the minister for economic development, Nerses Yeritsyan, tried to convince Armenian society that the world economic crisis would bypass the Armenian economy, due to its low involvement in the world financial system. However, the head of the analysis centre Alternative, PhD (economic science) and one of the leading economists of Armenia, Tatul Manseryan, says the second wave of the world financial crisis is real and the government of Armenia should do its best to protect the country from the threat. The expert believes that Armenia can even benefit from the situation.

Manaseryan thinks that the world economy hasn’t recovered from the first wave of crisis. This is no surprise, as the reason for the crisis in foreign debt is the irrationality of using taken credits. He draws Armenia’s attention to the developing economic models of Poland, India and Kazakhstan, where impressive economic growth has been registered during the crisis.

The expert noted several approaches to use the new wave of the crisis to Armenia's benefit. For example, a flexible tax policy for machinery imports, as bankrupted Armenian companies sell their new expensive equipment at low prices in order not to pay huge property taxes. Manaseryan also mentioned a big shadow over the country’s economy, as immense unused potential is covered over. He also considers that extending cooperation with Georgia and Iran can help overcome the crisis.

Thus, Manaseryan listed all the existing problems in the Armenian economy, pointing to the necessity to radically reform all the management systems in the economic sphere of the country. It is not his opinion only. The majority of the population understands that real achievements in the economy can be reached only if the structure is dramatically reformed.

Considering the words by the economist, it is understandable that Armenia could avoid the consequences of the second crisis wave only if the government comes to the right conclusions from past experience. Armenia is vulnerable in the crisis. Price fluctuations shouldn’t only be a problem of the Central Bank. The committee on protection of economic competiveness, the committee on state expenditure and other structures should fulfil their functions. It is obvious that the main element preventing development is not the world financial crisis, but the high level of monopolization of the economy and the growth of corruption in all administrative spheres.

Nevertheless, opposite views are expressed too. For example, the general director of British bank HSBC-Armenia, Astrid Clifford, thinks that today Armenia can face any negative development in the global economy even better than yesterday. However, she emphasized that Armenia’s resistant ability depends on measures taken by its government in the sphere of diversification of the economy, which “is already yielding positive results.” According to her, the European debt crisis won’t directly influence the financial system of Armenia, but can influence the economy negatively, due to composite European demand and the prices of goods, which Armenia exports. Moreover, decreasing oil prices could damage the Russian economy, and as a consequence goods’ flows to Armenia.

Some experts believe that tycoons are able and must refill the state budget up to one third. Considering a real attack on the super-revenues of tycoons could be more dangerous for the authorities with their consequences, it is not a surprise.

Winter is coming. It is a hard period, demanding great efforts from the population, as in Armenia people spend $150-200 per a month to heat a flat. Before, seasonal difficulties were compensated for by the growth in foreign transfers in this period. Today transfers have fallen by a third, and prices also grew by a third. It is not clear what is coming next.

The only answer to all these challenges is the Project of the Industry Policy Conception, aimed at exports. It has recently been presented for discussion by the business community of Armenia by the Economy Minister of the country. According to the project, implementation of the conception will enable GDP to grow up to 19% by 2020 and make export volumes reach $1 billion per year. No comments…

David Stepanyan, Yerevan. Exclusively to VK.

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