Expert: Isolation of Armenian economy has its advantages and disadvantages

ArmInfo. Armenia is in a unique situation due to its isolated economy, Aza Mihranyan, Head of the Economics Department at the CIS Institute, said during the Jan 21 Minsk-Yerevan video conference on "New Economic Realities for EEU Member States". She added that the given factor has a dual effect on the course of the region's economic development.

On the one hand, she says, the isolation deprives Armenia of the opportunity to get all benefits from the integration, unlike Kyrgyzstan, Belarus, Kazakhstan, etc. On the other hand, the isolation will enable the Armenian economy to maintain some stability and focus on the domestic aspects of the process. "The stability of the market indices is due to the fact that at the moment the Armenian exports are equally distributed both among the EEU countries (with the focus on Russia) and towards the European market and the United States," said Mihranyan.

As regards the Armenian dram volatility, the expert stressed that the national currency is more or less stable today but is experiencing a downward trend. "The sharp depreciation of AMD is fraught with a social upheaval for the Armenian economy, therefore, the Armenian authorities' policy aims to maintain a stable exchange rate. In the meantime, the competitiveness of the products on the foreign markets is dropping.  Investment influence is needed here to create jobs.  "Today one should not speak of pessimism or optimism.  The crisis is a time for sobering. Therefore, it is necessary to speak of realism," she stressed.

To note, the World Bank forecasts a 2.2% GDP growth for Armenia in 2016. Compared to 2015, the World Bank forecasts insignificant slowdown of economic growth from 2.5%. International Monetary Fund changed the forecast on Armenia's economy growth in 2015 from stagnation to 2.5% growth with further slowdown by 2.2% in 2016. EBRD improved the forecast on Armenia's GDP dynamics in 2015 from 1.5% decline to 2.3% growth with slowdown of growth to 2% in 2016. The Central Bank of Armenia has upgraded its economic growth forecast for Armenia from the previous 2.8- 3.6% to 3.2-3.9%, according to the CBA's monetary policy program for Q4 2015. 

According to the National Statistical Service of Armenia, in Jan-Nov 2015 the economic activity in Armenia grew by 2.9% versus 3.8% growth for Jan-Nov 2014. The foreign trade turnover of Armenia dropped by 20.6% in Jan-Nov 2015, with exports dropping by 4.7% and imports declining by 26.2%. By 1 Dec 2015, the foreign debt of Armenia amounted to $4.1 bln and experts think it will grow to $5 bln by 2017.