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Armenia's economy deteriorating as remittances decline

02 October 2014 [10:40] - TODAY.AZ

By Mushvig Mehdiyev

Downward tendency of remittances from Russia to Armenia has contributed to the decline of purchasing power of Armenians.

Armenia's National Bank has reported a considerable decrease in the private money transfers from Russia. The official data revealed that the money sent by Armenian migrant workers in Russia has dropped about 10 percent compared to last year's figure.

Armenian migrant workers transferred $156 million to their relatives in August this year, which is $6 million less compared to the same period in 2013.

High unemployment rate in Armenia has turned Russia into a top destination for the people leaving Armenia. The northern giant's close neighborhood and ally relations with the post-Soviet country inspire the migrant workers to earn their living there. Russia's Federal Migration Service has reported that nearly 670,000 Armenians traveled to Russia in 2013. The service said 90 percent of Armenians who arrived in Russia were job seekers.

The crisis facing Russia after the Western sanctions has affected the income of the migrant workers of Armenia which its annual public budget is based on the remittances from the overseas. The declining money transfers pose definite problems for the country. Armenian workforce in Russia are mostly consisted of male residents of the country's rural regions that are grappling with poverty. Many families pin their hope on the remittances from abroad. So, the decline of money transfers from Russia negatively hit these families and subsequently delivers a hard blow to Armenia's economy.

Analysts say that in recent years, under the diminishing remittances from Russia, the purchasing power of the population has decreased and the poverty has widened in Armenia.

Armenians are feeling the adverse results of the ongoing economic crisis in the real estate markets of their country. The market value of the properties has not dropped on the background of the crisis, the report of State Committee for Real Estate Cadastre shows. The average price of an apartment remained unchanged at $633 per square meter in Armenia, while the average price of private houses has increased by 0.3 percent to $676 per square meter. The houses in city centers is much more expensive with nearly $1300 per square meter.

The prices of the properties dropped during the economic slump in 2009. Many of the residents expected the same tendency this year, but the official data and unchanged property values in the markets disappointed them.

The global experience proves that the rich strata of a country's population sees no negative effect of the economic crisis. On the contrary, it increases its wealth by taking advantage of the current situation and this is the poor people who feel the burden of the crisis.

Most of the residents in Armenia said the unchanged prices in the real estate markets are controlled by the ruling elite, particularly by monopolists. For instance, during the crisis in 2009 population's bank deposits increased by 44.4 percent to nearly $220 million. Economic experts claimed that the vast majority of the deposits belonged to the rich people of the country, who estimated possible increase of their money after the crisis.

Particularly the youth in Armenia complain about high property prices. About $351 average monthly salary in the country leaves no chance for the youth to purchase a house with about 14 percent mortgage interest rate. Thus, they apply for rental houses, which also dissatisfy them with higher prices. Payment for rental houses in Armenia changes between $364 and $742, as surpasses or doubles the average monthly salary in the country.

Inappropriate domestic policy of the government, imbalanced business environment and privileged monopolists in Armenia have cemented the 105th place for it among 144 countries in terms of the effectiveness of antitrust policy.



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