Tweet
Armenian Economy Recovers Faster Than Expected
August 12, 2010
Emil Danielyan
Armenia's economy is emerging from its first major downturn since the
early 1990's faster than expected, helped by similar recovery
globally.
Official statistics show that it expanded by 6.7 percent in the first
half of this year and surpassed even the most optimistic government
expectations. The Armenian authorities now expect full-year growth to
reach between 5 to 7 percent, sharply up from the 1.2 percent forecast
last December.
Armenia was one of the countries hardest hit by the global recession:
GDP contracted by as much as 14.4 percent last year after a decade of
robust growth. A slump in construction, international prices of base
metals (the country's main export item) and multimillion-dollar
remittances from Armenians working abroad was instrumental in the GDP
decline. It would have been even sharper without the large-scale
anti-crisis loans obtained by Yerevan from Moscow, the International
Monetary Fund (IMF), World Bank and other international lending
institutions.
Year-on-year negative growth stopped and even moved into positive
territory in the fourth quarter of 2009. It progressively accelerated
from 2.2 percent in January 2010 to 8.8 percent in January-May. The
growth rate slowed in June because of a sharp fall in agricultural
production resulting from highly unfavorable weather conditions. It
was more than offset by a 12.3 percent rise in industrial output, the
main driving force behind the first-half year growth, which has
benefited from rallying international prices of copper, molybdenum and
other base metals. Other export-oriented manufacturing sectors of the
economy, notably food and diamond processing, also reported strong
production increases. That translated into a 56 percent surge in
Armenian exports totaling $443 million in the six-month period. The
National Statistical Service (NSS) registered more modest gains in
construction and services other than the retail trade (The National
Statistical Service, www.armstat.am).
Another factor behind the recovery is renewed growth in cash transfers
from Armenian migrant workers abroad. According to the Armenian
Central Bank, the total amount of non-commercial remittances, most of
them coming from Russia, rose by over 10 percent to $380 million in
January-May: equivalent to 14.4 percent of GDP. The improved
macroeconomic performance led the Armenian government to declare an
end to the economic crisis, which is estimated to have pushed up the
country's official poverty rate from over 25 percent to about 29
percent. `We have entered a renewed phase of stable economic
development,' Finance Minister, Tigran Davtian, told journalists
(Arminfo, July 4). Opposition politicians dismissed these assurances,
again questioning the credibility of the government's macroeconomic
data. `The economy remains in serious crisis,' insisted Hrant
Bagratian, a former Prime Minister now affiliated with the main
opposition Armenian National Congress (www.armenialiberty.org, July
20).
Nevertheless, the IMF, which trusts the official figures, essentially
shared the government's assessment of the improving economic
situation.
`The Armenian economy is emerging from a deep downturn,' the fund's
deputy managing director, Murilo Portugal, said in a June
28 statement (www.imf.org) that announced the release of a new IMF
loan package for Armenia worth $395 million.
The fund cut short the $830 million lending program, which it had
launched in March 2009 to help the authorities in Yerevan cope with
the recession. They have since received $560 million worth of loans
under that scheme. Portugal explained that Armenia's ongoing economic
recovery is necessitating a change in the authorities' economic
priorities and that the new program will enable them to renew their
focus on `medium-term challenges.' Achieving `strong growth' is one of
those challenges, he said.
Visiting Yerevan in May, Mark Lewis, another senior IMF official,
warned that Armenian growth will continue to be hampered by poor and
arbitrary tax collection and `powerful oligopolies,' which he said
play an important role in the domestic economy. He repeated IMF
arguments that the amount of taxes collected by the Armenian
government is `very low by international standards,' in both absolute
and relative terms (ARKA, May 19).
The subsequent IMF statement, quoting Portugal, said the government
has drawn up a `broad tax administration reform' program and pledged
to implement other `wide-ranging structural reforms' that would
improve Armenia's flawed business environment. The country's
technocrat Prime Minister, Tigran Sargsyan, has repeatedly (and
vocally) described such reforms as a top priority. However, his reform
record has been patchy so far, with many Armenian government-linked
businessmen continuing to enjoy privileged treatment by tax
authorities and the under reporting of their earnings. Some of them
have also effectively monopolized lucrative forms of business, such as
fuel and food imports.
The government's first-half year tax revenues soared by 23 percent to
286.2 billion drams ($785 million), bringing the state budget down to
a level equivalent to 1.3 percent of GDP. Data from the Armenian
finance ministry indicates that increased proceeds from value-added
tax generated much of this increase, whereas government revenues from
corporate profit tax shrunk by more than 3 percent
(www.armenialiberty.org, August 3). This is a clear indication that
tax evasion among Armenian companies remains widespread.
However, the tax revenue total was almost 12 percent higher than the
government had projected for the first half of 2010. The government
further highlighted its improving fiscal position in early July, when
it restored the practice of drawing up three-year budgetary
expenditure plans, which were suspended in 2009 because of the
economic crisis. The government's spending targets for the next three
years are based on the expectation that the Armenian economy will
continue to grow in 2011-2013 at an average annual rate of roughly 4
percent.
Source: http://www.jamestown.org/programs/edm/
http://georgiandaily.com/index.php?option=com_content&task=view&id=19687&Itemid=132
From: A. Papazian
August 12, 2010
Emil Danielyan
Armenia's economy is emerging from its first major downturn since the
early 1990's faster than expected, helped by similar recovery
globally.
Official statistics show that it expanded by 6.7 percent in the first
half of this year and surpassed even the most optimistic government
expectations. The Armenian authorities now expect full-year growth to
reach between 5 to 7 percent, sharply up from the 1.2 percent forecast
last December.
Armenia was one of the countries hardest hit by the global recession:
GDP contracted by as much as 14.4 percent last year after a decade of
robust growth. A slump in construction, international prices of base
metals (the country's main export item) and multimillion-dollar
remittances from Armenians working abroad was instrumental in the GDP
decline. It would have been even sharper without the large-scale
anti-crisis loans obtained by Yerevan from Moscow, the International
Monetary Fund (IMF), World Bank and other international lending
institutions.
Year-on-year negative growth stopped and even moved into positive
territory in the fourth quarter of 2009. It progressively accelerated
from 2.2 percent in January 2010 to 8.8 percent in January-May. The
growth rate slowed in June because of a sharp fall in agricultural
production resulting from highly unfavorable weather conditions. It
was more than offset by a 12.3 percent rise in industrial output, the
main driving force behind the first-half year growth, which has
benefited from rallying international prices of copper, molybdenum and
other base metals. Other export-oriented manufacturing sectors of the
economy, notably food and diamond processing, also reported strong
production increases. That translated into a 56 percent surge in
Armenian exports totaling $443 million in the six-month period. The
National Statistical Service (NSS) registered more modest gains in
construction and services other than the retail trade (The National
Statistical Service, www.armstat.am).
Another factor behind the recovery is renewed growth in cash transfers
from Armenian migrant workers abroad. According to the Armenian
Central Bank, the total amount of non-commercial remittances, most of
them coming from Russia, rose by over 10 percent to $380 million in
January-May: equivalent to 14.4 percent of GDP. The improved
macroeconomic performance led the Armenian government to declare an
end to the economic crisis, which is estimated to have pushed up the
country's official poverty rate from over 25 percent to about 29
percent. `We have entered a renewed phase of stable economic
development,' Finance Minister, Tigran Davtian, told journalists
(Arminfo, July 4). Opposition politicians dismissed these assurances,
again questioning the credibility of the government's macroeconomic
data. `The economy remains in serious crisis,' insisted Hrant
Bagratian, a former Prime Minister now affiliated with the main
opposition Armenian National Congress (www.armenialiberty.org, July
20).
Nevertheless, the IMF, which trusts the official figures, essentially
shared the government's assessment of the improving economic
situation.
`The Armenian economy is emerging from a deep downturn,' the fund's
deputy managing director, Murilo Portugal, said in a June
28 statement (www.imf.org) that announced the release of a new IMF
loan package for Armenia worth $395 million.
The fund cut short the $830 million lending program, which it had
launched in March 2009 to help the authorities in Yerevan cope with
the recession. They have since received $560 million worth of loans
under that scheme. Portugal explained that Armenia's ongoing economic
recovery is necessitating a change in the authorities' economic
priorities and that the new program will enable them to renew their
focus on `medium-term challenges.' Achieving `strong growth' is one of
those challenges, he said.
Visiting Yerevan in May, Mark Lewis, another senior IMF official,
warned that Armenian growth will continue to be hampered by poor and
arbitrary tax collection and `powerful oligopolies,' which he said
play an important role in the domestic economy. He repeated IMF
arguments that the amount of taxes collected by the Armenian
government is `very low by international standards,' in both absolute
and relative terms (ARKA, May 19).
The subsequent IMF statement, quoting Portugal, said the government
has drawn up a `broad tax administration reform' program and pledged
to implement other `wide-ranging structural reforms' that would
improve Armenia's flawed business environment. The country's
technocrat Prime Minister, Tigran Sargsyan, has repeatedly (and
vocally) described such reforms as a top priority. However, his reform
record has been patchy so far, with many Armenian government-linked
businessmen continuing to enjoy privileged treatment by tax
authorities and the under reporting of their earnings. Some of them
have also effectively monopolized lucrative forms of business, such as
fuel and food imports.
The government's first-half year tax revenues soared by 23 percent to
286.2 billion drams ($785 million), bringing the state budget down to
a level equivalent to 1.3 percent of GDP. Data from the Armenian
finance ministry indicates that increased proceeds from value-added
tax generated much of this increase, whereas government revenues from
corporate profit tax shrunk by more than 3 percent
(www.armenialiberty.org, August 3). This is a clear indication that
tax evasion among Armenian companies remains widespread.
However, the tax revenue total was almost 12 percent higher than the
government had projected for the first half of 2010. The government
further highlighted its improving fiscal position in early July, when
it restored the practice of drawing up three-year budgetary
expenditure plans, which were suspended in 2009 because of the
economic crisis. The government's spending targets for the next three
years are based on the expectation that the Armenian economy will
continue to grow in 2011-2013 at an average annual rate of roughly 4
percent.
Source: http://www.jamestown.org/programs/edm/
http://georgiandaily.com/index.php?option=com_content&task=view&id=19687&Itemid=132
From: A. Papazian