Armenia on edge of economic collapse

/By Azernews/

By Nazrin Gadimova

Extremely unstable socio-economic situation in Armenia would be better described as a decay of the country. Various international organizations make unfavorable forecasts regarding the economic situation that Armenia faced.

The Eurasian Development Bank (EDB) analysts expect deterioration of Armenia's balance of payments in 2016. This was noted in the “CIS Macromonitor” report published by analysts of the EDB.

“The possible deterioration of the payments balance is linked with the expansion of foreign trade deficit due to reduced exports and increased imports in monthly terms. During this period, there was recorded return to the trend of depreciating dram, which was intensified by strengthening of the dollar on world markets,” EBD analysts believe.

Probably, under the influence of the foreign trade and the current account deficit expansion, as well as further cheapening of dram and increased short-term external debt, the payments balance could deteriorate, the report says.

Earlier during the discussions over the state budget at the country’s parliament, many opposition parliamentarians have predicted the collapse of the country.

MP Mger Shakhgeldian claimed that the economic growth index shown in the draft budget is not sufficient to ensure the development and competitiveness of Armenia in the region.

He said the GDP growth of 2.2 percent in general should not be considered as a growth for a country like Armenia, because this growth cannot lead to any positive effects.

"However, I doubt that in today's environment we will be able to provide even this growth of 2.2 percent,” Shakhgeldian said, noting that actually, Armenia's economy is still alive exclusively due to the exploitation of natural resources, since the growth is provided by agriculture and mining industry.

Another important problem is the issue of the growing national debt, the MP stressed. “We have many times raised the issue of debt volume that is increasing from year to year, but in vain,” Shakhgeldian said.

He also drew parallels between the dynamics of GDP growth and increasing external debt. In 2014, the economic growth amounted to 3.5 percent, in 2015 it was 2.5 percent, while in 2016 it is forecasted at 2.2 percent. Along this, the country’s debt amounted to $3.8 billion in 2014, $4.5 billion in 2015, and in 2016 it will amount to $4.8 billion.

“The dynamics is obvious, economic growth rate, as well as revenues decline, while the public debt is growing. A question arises: how the debt will be paid in case these dynamics kept?” Shakhgeldian noted.

Head of the parliamentary fraction Armenian National Congress, Levon Zurabyan stated that under such conditions, the Armenian economy will recover only by 2040.

“Although the growth was projected at the level of 2-2.5 percent during 2015-16, the Armenian EV Consulting company, which prepares reports on Armenia for the Global Economic Forum’s annual rankings, predicts that even if the growth continues at the level of 3.5 percent, the Armenian economy will recover only in 2040,” he said adding that currently, 50,000 people leave the country a due to the economic problems.

Mass migration of able-bodied citizens is not anything new for the country. Majority of Armenians are leaving because they cannot find a job in their native land, and if they do, then the wages are so low that they cannot provide the necessities for themselves and relatives.

The results of recent survey revealed that almost 32 percent of respondents are ready to leave because of lack of work, 30 percent - due to hopelessness, 20 percent - because of the lack of justice, and 17 percent - due to lack of livelihood.

The country’s authorities are not very concerned about this phenomenon. Over the past years, Armenia’s authorities simply denied the existence of migration, and when they finally recognized this fact a million people has already left the country.

Local experts blame the corruption and abuse of power as the real cause of the tough situation prevailing here. Even though Armenia has made several anti-corruption efforts, the de facto situation on the ground remains very problematic.