WB: Armenia`s economic development model completely exhausted

ArmInfo. The model of Armenia's  economic development has completely exhausted itself, said during the  presentation, published on June 15 of the World Bank (WB) report  "System Assessment of Armenia. Results. Future of Armenia" Program  Manager of the WB of the South Caucasus, Europe and Central Asia  Genevieve Boyreau. She justified her assessment with a significant  increase in the country's socially vulnerable population at the  expense of the middle strata.

According to her, today Armenia needs economic reforms, otherwise the  state will provide "modest" GDP per capita. "Armenia faces two main  systemic challenges: aging and population decline, as well as climate  changes that will negatively affect economic growth if economic  policy reforms are not carried out," she said. According to the WB  expert group, a balanced growth of global relations is envisaged in  the new model for the development of the Armenian economy, in  particular, through the expansion of trade and investment, a  transition from illiquid to liquid goods and services is necessary;  The formation of a dynamic, efficient and competitive business  environment that creates jobs. It is necessary to achieve an increase  in labor productivity and provide flexibility to the new model, which  will be hardy before climate change.

In particular, speaking about competitive environment, the expert  noted that during the last years certain steps were taken in this  direction, but they are clearly not enough for profound changes in  the legal framework, and financial accessibility still remains a key  obstacle to the development of the private sector.  According to the  data of 2013, only 3% of Armenian entrepreneurs had access to credit  resources and other financial sources, while this figure in the  countries of Europe and Central Asia is approaching 49%. At the same  time, 75% of representatives of big business in Armenia have credit  obligations in banks, whereas small entrepreneurs accounted for only  31%. According to her, the problem of entering the market for new  participants, the difficulties with the growth of small enterprises,  the lack of a competitive field between manufacturers, the lack of  transparency in matters of state assistance and the availability of  fair competition with participation in public procurement still  remain the actual problems. To improve the business environment, the  WB experts insist on simplifying, as far as possible, financial  accessibility, expanding access to innovations, improving the  corporate governance system, strengthening the effectiveness of  competition legislation, strengthening the profit distribution  environment, forming modern agriculture, eliminating gaps that impede  the improvement of the investment environment.

According to WB experts, when carrying out economic reform, GDP per  capita until 2020 will remain at the same actual level of $ 4  thousand, with a tendency to increase in 2030 to 6 thousand, and in  2050 experts provide per capita GDP exceeding $ 12 thousand, while,  according to the actual scenario, this figure will not exceed $ 8  thousand.

By the reformation scenario, the poverty will reduce from current 30$  to 25% by 2020, 10% by 2030, and by 2050 - 0.2-0.3%. If the reforms  are not carried out, WB experts predict poverty in Armenia in 2050 at  the level of 7-8%. 

Speaking about Direct Foreign Investments, WB expert noted that in  the period of 2012-2015, the share of DFI in GDP was 3.7-3.8%, while  in the period of 2005-2008 it was 7.2%. Boyreau noted that there are  9-11 million Armenians in the world and the potential of Diaspora is  not used effectively. 

According to National Statistical Service of Armenia, in the first  quarter of 2017, the GDP per capita grew by 8.7% per annum to 325727  AMD ($671/629 EUR). According to IMF, in the rating of states by GDP  in 2016, Armenia occupied 115 position ($3511),

To recall, the World Bank (WB) predicts GDP growth in Armenia in 2017  by 2.7% with the acceleration of the rate in 2018 to 3.1%, in 2019 -  up to 3.4%. The state budget of Armenia for 2017 laid the GDP growth  by 3.2%. According to the updated forecast of the Central Bank of  Armenia, GDP growth in Armenia in 2017 will be 3.2-4.4%, according to  the IMF forecast of 2.9%, according to Fitch forecast - 2.1%, EDB -  2.9% and Asian Development Bank - 2 , 2%.