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International Institute: Armenian government currently has few options to boost the faltering economy

23 October 2015 17:05 (UTC +04:00)

According to the article, the decrease in financial transfers from Russia puts additional pressure on Armenia’s economy, as 21 percent of the country’s GDP derives from remittances. Remittances from Russia diminished by 56 percent last year, and are expected to decrease further due to ruble depreciation and a slowdown in the Russian market. Slumping remittances and devaluation of the national currency have an adverse effect on salaries and tax revenue, and boost the price of essential foodstuffs, which increases economic hardship for ordinary people.

The government currently has few options to boost the faltering economy and mitigate the wave of public discontent. Mounting n

National debt of Armenia is expected to reach 44.5 percent of GDP in 2015.

Key international companies such as Etihad Airways, Samsung and France Telecom-Orange announced that they will soon stop business operations in Armenia. The World Bank and International Monetary Fund forecast that in 2015, economic growth in Armenia will be weak or even negative. Armenia joined the EEU at a very unfortunate moment, when the Russian economy, the Union’s largest, is contracting sharply, which significantly undermines the feasibility of the whole organization. On May 7, Armenia concluded the Trade and Investment Framework Agreement with the U.S. However, the economic impact of the agreement is questionable, because the U.S. is not among Armenia’s most important trade partners – bilateral trade amounts to only 4.6 percent of Armenia’s overall foreign trade and this number is steadily dropping. Pending the end of international sanctions against Iran, Armenia anticipates possible trade and investment benefits from non-restricted cooperation with its southern neighbor. A proposed railway connecting Iran and Armenia with one of Georgia’s Black Sea ports remains a most important project for Yerevan. Protests over a price hike on electricity, which has taken place in Armenia since July this year, reflect a growing public disillusionment with the government’s economic policy. Nonetheless, Russian media have linked the protests to the U.S. geopolitical agenda. Moscow is apparently concerned that the protests could spiral into an anti-Russian outcry and has made several conciliatory moves towards Armenia.

The article also says furthermore, the oligarchic structure of Armenia’s economy and the low quality of governance will hinder any efforts to modernize and boost the economy.