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Will relocators and separatists save Armenia?

31 July 2024 [15:40] - TODAY.AZ
By Leyla Tarverdiyeva, Day.Az

Fitch Ratings has confirmed Armenia's rating. It remains at the "BB-" level with a stable outlook.

Note that the Fitch rating scale is divided into "Investment Grade" and "Speculative Grade". The "BB" level refers to the latter and is assigned to countries with a creditworthiness level below sufficient. For comparison, Azerbaijan has been assigned a rating of "BBB-", which implies a sufficient level of creditworthiness and compliance with the investment class.

The rating agency sees a 6% growth in the Armenian economy this year. For the next two years, the results are slightly lower: in 2025 - 5.5 percent, in 2026 - 5.1 percent. It is predicted that the Armenian economy will continue to grow, especially in the field of tourism and ICT.

The European Bank for Reconstruction and Development also sees the near-term prospects of the Armenian economy in a rosy light. Initially, economic growth of 5 percent was forecast for 2024, but then the EBRD raised the bar to 6.2 percent. The forecast for 2025 is cautious - 5 percent.

According to Armenian media, at the final press conference following the results of the EBRD annual meeting and business forum held in Yerevan in May, the bank's leading economist, Beata Yavorchik, explained that the bank had taken into account the change in factors affecting the economy related to the influx of foreign citizens, in particular Russians, many of whom are qualified programmers. They have changed Armenia's IT sector not only quantitatively, but also qualitatively. According to EBRD experts, the factor positively influencing Armenia's economic performance is... the influx of voluntary migrants from Karabakh. Government spending on their needs, entering the economy, will stimulate the consumption of goods and services, says Beata Yavorchik.

Fitch Ratings also believes that Armenia's economic growth has been and continues to be facilitated by relocators from Russia, Belarus, and Ukraine, as well as migrants from Karabakh, who are actively involved in the country's economy as consumers, labor and businessmen. In addition, the Amulsar mine should be operational in 2025.

So, we have the following: The Armenian economy has grown and, perhaps, will continue to grow at the expense of Russian relocators with brains and money and nimble migrants from Karabakh who squeeze businesses from the locals. None of the speakers, mind you, talks about growth in the real economy. Services, tourism, IT. 

According to some reports, the number of IT specialists in Armenia increased significantly after the start of the Russian-Ukrainian war, which contributed to the revival in this area. The country that calls itself almost the Silicon Valley of the region, it turns out, was nothing in this regard until the Russian IT specialists arrived.

Suspicions that something was wrong with the Armenian economy appeared by the end of 2022. First, the EBRD led Armenia to be the leader of the South Caucasus in economic growth, and then the World Bank pleased the Armenians by estimating the country's GDP growth in 2022 at 10.8 percent, which turned out to be even 3 percent more than forecast. Incredibly, Armenia's GDP growth turned out to be the highest among the countries of Europe and Central Asia. This came as a shock to everyone else, and the Armenians had already experienced a shock when they themselves summed up the economic results of the year. State budget revenues amounted to $5 billion, which was not predicted by anyone at the beginning of 2022, and GDP, which was projected at 1 percent, jumped as much as 15. Inspired by this success, Armenian economists began to make optimistic forecasts for 2023. GDP growth was projected at 7 percent, and budget revenue growth was projected at 18 percent. At the same time, no one predicted the growth of industry or the extractive industry. The same service sector, tourism, restaurants, hotels, and IT.

Back in 2022, sensible economists warned Armenians against euphoria, pointing out that Russian relocators, who became the true reason for the fantastic rise in indicators, would sooner or later leave. The war in Ukraine will end someday, peace will reign, and it is unlikely that any of the Russians who have moved their businesses to Armenia will stay in this country. Both companies and money will go away.

The Armenian leadership, not realizing that the country is heading towards the abyss in such a situation, is trying to present these "achievements" as the merit of its government and its economic policy. The euphoria continues.

The economy is actually standing, but Armenia's GDP in the first quarter of 2024, according to the RA Statistics Committee, grew by 9.2 percent, to about 1.97 trillion. AMD ($4.8 billion)!

Foreign experts sarcastically say that they have not noticed such an "economic miracle" even in China. Armenian expert circles have estimated that the real growth in the first quarter of this year is in the range of 6, not 9.2 percent. Economist Haykaz Fanian told reporters that an increase of 31.1 percent was recorded in the manufacturing industry, which is mainly due to the re-export of jewellery. Due to this, the volume of exports from Armenia increased by 55 percent during 2023. The main export destinations are the United Arab Emirates and Hong Kong, and the country of origin is Russia.

Interestingly, in 2023, Armenia exported 4.5 million carats of diamonds, which is 30 times more than produced in the country itself!

Re-export and circumvention of anti-Russian sanctions is a special point in the "wonders" of the Armenian economy.

In May, at a meeting of the Eurasian Expert Club, Armenian expert Aghasi Tavadian noted that previously cognac was the main export item of Armenia to the Russian Federation, and since 2022 "there has been a transition to technological products." Now, Armenia exports telephones, cars, medical devices, and radio equipment. 

During the same period, exports of machinery and equipment to Russia increased by more than 10 times, and exports of chemical products, plastics, ceramics, glass, and metals increased by more than 3 times. The increase in the re-export of machinery and equipment significantly contributed to the growth of exports, the expert noted with satisfaction.

That is, Armenia exports today mainly what it does not produce. And he calls it not re-export, but export. Like the same re-export of cars. Even after Georgia, obeying the sanctions regime, banned the supply of cars to Russia through its territory, the cunning Armenians came up with a way out. A whole scheme of customs clearance and transportation of "private" cars to Russian territory has been developed.

Not so long ago, Prime Minister Nikol Pashinyan called "nothing more than talk" suspicions of the participation of Armenia or Armenian firms in schemes to violate the anti-Russian sanctions regime. But the situation is so obvious that it would be best for the Armenian Prime Minister to remain modestly silent. And start actively thinking about what will happen to the Armenian economy when the relocators leave.
URL: http://www.today.az/news/regions/251257.html

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