Adjusting to New Situation: Premier says challenges to Armenia’s economy also “geopolitical”

Adjusting to New Situation: Premier says challenges to Armenia’s economy also “geopolitical”

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Armenia’s National Assembly voted overwhelmingly Wednesday to pass the 2016 state budget, which the government says has been adjusted to the “current economic developments.”

“We have no option other than making adjustments in our adopted economic reforms in line with the new situation,” Prime Minister Hovik Abrahamyan told lawmakers before the vote. (The 131-member parliament approved the budget by 97 votes to 12, with 3 abstentions).

He noted that the challenges facing Armenia’s economy today are not only economic, but also political or geopolitical by their nature.

“And that means that they are not always predictable and calculable. It is for this reason that prestigious international organizations believe that the world and especially our region are experiencing a more difficult situation than the recent financial crisis,” the Armenian premier said, informing the lawmakers that in this context the long-term economic development plan until 2025 approved in 2014 will be reconsidered.

Abrahamyan conditioned this year’s economic problems in Armenia by external impacts, pointing out falling exports from and volumes of private remittances to Armenia.

According to the data of the National Statistical Service (NSS), exports from Armenia in January-October 2015 decreased by 2.8 percent, while exports to Russia fell by 29.4 percent, which, according to Abrahamyan, was due to the “decrease in the purchasing power of consumers [in Russia],” which “in turn had a negative impact on the revenues of businesses in Armenia.”

The Armenian premier also addressed the decrease in remittances wired by Armenians from Russia, saying that they were reduced by around $470 million. Overall, according to official data, in January-October the total amount of private remittances made a little more than $1 billion, reducing by more than 32 percent in the annual context (the decrease of remittances from Russia made 38 percent).

“It is obvious that these developments could not but have an impact on the population’s consumption, as a result of which trade in the first 10 months decreased by around 5 percent,” said Abrahamyan, adding that his government managed to avoid recession due to “concentration of efforts and resources” as well as “major programs, accents and non-standard solutions”.

It is noteworthy, however, that the government is not particularly optimistic about 2016 prospects either. It plans a 2.2-percent economic growth next year. In particular, Finance Minister Gagik Khachatryan said that for Armenia it would be achievement if it could maintain the situation as it was in 2015.

Republican Union of Employers of Armenia head Gagik Makaryan says this year poverty in Armenia has increased for several reasons – the poor economic situation in Russia, which led to the reduction of remittances, closures of some small and medium-sized enterprises, as well as inflation in certain areas, which, according to NSS data, during the first 11 months of 2015 was 4.1 percent overall.

“Poverty in Armenia has increased and according to unofficial data it reaches 64 percent in rural towns. According to these data, half of Armenia’s population can be considered poor,” he said.