TODAY.AZ / Analytics

Experts forecast domino effect in Armenian economy

10 November 2014 [15:59] - TODAY.AZ

/AzerNews/

By Mushvig Mehdiyev

Armenian people are seriously concerned over the non-stop devaluation of Russian ruble. Most of the residents are reportedly in a nervous state as the weakening ruble deteriorates their financial condition.

The local Haykanak Zhamanak paper said the uncontrolled devaluation of ruble has caused a great panic among the country's residents. "Thousand of Armenian families are seriously concerned over the ruble's weakening. It's no secret any more that nearly 80 percent of Armenia's population receives money from their relatives living in Russia. The ruble has devalued by 30 percent so far. It means that the income of our people has decreased at the same level," paper wrote.

Reuter’s expert, Marc Jones said the Russian ruble's downfall will inevitably affect the economies of the other post-Soviet states because of strong trade relations between Russia and those countries.

"Accelerating decline of the ruble, which has already dropped by 30%, will actually lead to a downturn characterized by domino effect in the former "ruble zone" covering the former Soviet states," Jones noted.

Jones went on noting that the black clouds over the Russian economy has emerged before the exacerbation of the Ukrainian crisis and now, the western sanctions and decline of the major incomes from oil and currency have aggravated the situation far more.

He said the adverse results of the economic slump in Russia, in 2008, are still felt in the CIS states. "Poor CIS countries, including Armenia, Belarus, Uzbekistan and others faced recession and collapse in the construction and banking fields."

Armenia's economy has slid to a low against the backdrop of its firm dependence on Russian economy. The northern giant has failed to head off the continuous blows on its economy as the western forces imposed an economic blockade on it. The challenges of the isolated Russian economy have inflicted Armenia's economic life to the fullest.

James noted that the non-stop devaluation of the ruble causes a real headache for the governments of CIS states. "One fifth of Armenia's total exports is directed to Russia. That income plays a crucial role in terms of the country's balance of payment deficit by reaching nearly 10 percent of the GDP."

Armenia's geographic isolation, narrow export base, and prevalent monopolies in significant business fields have made it considerably vulnerable against the economic downturn in Russia.The country is particularly dependent on Russian commercial and governmental support. A France-based Observatory of Economic Complexity research center, which allows to quickly compose a visual narrative about countries and the products they exchange, reported that Russia is Armenia's top export destination with about 19 percent share of the post-Soviet state's total exports. Germany, Canada, Yemen and Belgium-Luxembourg respectively follow Russia, composing Armenia's top five export directions.

Jones went on saying that private money transfers from Russia to Armenia are also a significant factor behind the economic hardship. "Private money sent by migrant workers is one of the main factors here. Almost 80 percent of the whole remittances to Armenia is transferred from Russia," he noted.

According to the Central Bank's latest data, the amount of the private money transferred to Armenia via bank system in this September was about $153.3 million being below the same figure remitted in the relevant period of the last year. The red balance was roughly $9.2 million, while the total amount of the remittances was about $170 million instead of $180 million.

Martin Luther King once said: "I have a dream" and expressed his strong will for independence. But how can the incumbent Armenian authorities say the same words? The best option for them is to say "We have a hundreds of dreams" since the country needs an extraterrestrial power or a power of dreams to tackle a mountain of problems and challenges.

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