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World Bank Downplays Armenian Economic Recovery

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  • World Bank Downplays Armenian Economic Recovery

    WORLD BANK DOWNPLAYS ARMENIAN ECONOMIC RECOVERY

    Asbarez
    http://www.asbarez.com/77847/world-bank-downplays -armenian-economic-recovery/
    Feb 26th, 2010

    YEREVAN (RFE/RL)-A senior World Bank official on Friday downplayed
    official reports of renewed economic growth in Armenia and said
    its government is still not doing to enough to tackle "oligopolies"
    which the Washington-based institution believes hamper the country's
    development.

    According to government statistics, the Armenian economy grew by 2.4
    percent last month after contracting by 14.4 percent in 2009. Trade
    and Economic Development Minister Nerses Yeritsian seized upon the
    figure on Monday to declare the end of a serious economic downturn
    that gripped the country more than a year ago.

    Aristomene Varoudakis, head of the World Bank office in Yerevan,
    questioned this claim, saying that the January growth only means that
    "the acute phase of the crisis is over." "But it doesn't necessarily
    mean that the crisis is over because the economy contracted by 15
    percent last year," he said.

    "If it grows by 2 percent this year and perhaps 3 or 4 percent next
    year, it will take three to four years for the economy to come back to
    the income level of 2008," Varoudakis told a news conference. "So it
    is very likely that the economy will remain weak for quite a prolonged
    period of time."

    Armenia's Gross Domestic Product increased at an average annual rate of
    around 10 percent in the decade preceding the recession. The Armenian
    government forecasted late last year a GDP growth rate of 1.2 percent
    for 2010. A senior official from the International Monetary Fund said
    last week that it could exceed 2 percent.

    Varoudakis stood by the World Bank's view that renewed robust growth
    is contingent on a greater diversification of the Armenian economy
    that in turn requires a radical improvement of its investment climate.

    He said the authorities in Yerevan have taken some "steps in the
    right direction."

    "But I think what is missing there is some bold initiatives, bold and
    ambitious steps to reduce the role of oligopolies in the economy,"
    stressed Varoudakis. "As long as some important markets, especially
    for imports, are dominated by oligopolistic players, this reduces the
    possibility for other market entrants, especially small enterprises
    to grow and make money and invest in other sectors of the economy."

    "Also, it will be very important to have transparency regarding
    possible linkages between dominant businesses and public officials,"
    he said, clearly referring to the widely held belief that the so-called
    "oligarchs" enjoy high-level government patronage.

    The World Bank's managing director, Ngozi Okonjo-Iweala, issued
    a similar warning, in blunter terms, when she visited Yerevan last
    October. She said Armenia can not attain a higher level of development
    unless its leadership improves tax administration, creates a "strong
    and independent judicial system" and combats government corruption
    in earnest.

    Prime Minister Tigran Sargsyan has publicly acknowledged the need
    for such reforms. Addressing parliament in November, he said the
    oligopolistic structures "pose a very serious challenge" to the state.

    Some observers believe, however, that he lacks the power and political
    clout to take on them.

    Varoudakis commented on the economic situation as he announced the
    disbursement of two fresh World Bank loans to Armenia worth $12
    million. One of the loans worth $7 million is designed to finance
    infrastructure projects in 35 mostly rural communities across the
    country.

    The bank already financed such projects last year as part of its
    efforts to help the authorities mitigate consequences of the crisis.

    Its overall anti-crisis lending to Yerevan totaled $280 million
    in 2009.
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