Thursday, January 4 2024 11:00

ArmInfo. Armenia will close 2023  with GDP growth in the range of 8- 8.5%, instead of the 7% planned by  the state budget and the 7.2% expected by the budget for 2024. At the  same time, the country's GDP generation potential, as before, does  not exceed 5%, Armenia's former minister of finance Vardan Aramyan  told ArmInfo. 

According to the expert, the growth structure of the Armenian economy  still causes concern. As in 2022, the lion's share of economic  activity falls on the non-exportable sector - trade, construction and  services.  So, for 11 months of this year. the growth of economic  activity in the Republic of Armenia amounted to 9.4% per annum. The  growth was largely determined by the trade sector - by 24.3% per  annum, and to a lesser extent by the construction sector - by 15.6%  and the service sector - by 11.1%, against which the growth of the  industrial sector turned out to be scanty - 2.1% . The dynamics of  the energy complex sharply deteriorated from 16.8% growth to 4.3%  decline.

Against this background, Armenia's foreign trade turnover in  January-November 2023 exceeded 7 trillion.  drams ($17.9 billion),  slowing down in annual growth to 42.4% (from last year's 67.8%),  which is due to the slowdown in annual growth of both exports - from  75.2% to 44.7%, and imports - from 63. 6% to 41%, the absolute value  of which amounted to 2.7 trillion and 4.3 trillion drams ($6.9  billion and $10.9 billion), respectively, an increase to a 4.3%  decline.

Vardan Aramyan draws attention to the fact that the high growth of  the industrial sector in just one month - November to November 2022,  according to statistical data, is due to a 13.7-fold jump in jewelry  production volumes (November 2023 to November 2022. The overall  industrial sector grew by 23.8%). 

"Everyone knows that it is impossible to ensure such an increase in  production volumes in a month. And, most likely, this is due to  re-export: "raw materials," but in reality - almost finished products  arrived at jewelry factories in Armenia and then the products were  exported as goods from the EAEU. The version that there is no real  growth in the industrial sector is also supported by the decline in  electricity production, which is one of the best indicators for  understanding these dynamics," he points out.

The expert asks whether the 44.7% increase in goods exports is  natural? "Why are we producing so much?  The agricultural sector is  growing at a relatively modest pace, as is industry, even if we  adhere to the version of the statistical service. Consequently, the  hypothesis is confirmed that re-export plays a significant role in  ensuring the recorded indicators," explains Aramyan. At the same  time, according to the economist, compared to 2022, the role of  relocated employees has decreased, since the growth rate of the  influx of Russians has significantly decreased.

Thus, as Aramyan notes, despite the fact that Armenian GDP at the end  of this year will grow more than planned by the state budget, from  the point of view of the growth structure, the risks that exist in  2022 remain. "In 2022, the lion's share of GDP growth is 12.6% -  about 11 percentage points. was due to the growth of the  non-exportable sector. Final data on economic growth will be  published in February, but today we can say that the situation will  not change," explains the economist.

Assessing potential using statistical methods is a thankless task,  the expert notes. He recalls that from 2001 to 2008, it would seem  that when calculating using this methodology, the GDP growth  potential consistently increased (during this period, Armenian GDP  grew from 5.9% in 2020 to 13.9% in 2005). At the end of 2007, even  the growth potential was estimated at about 7%. But 2009 came, the  economy fell by 14.1% and the fallacy of this myth became obvious,  since growth during the reporting period was due to an increase in  remittances from abroad and due to the construction and services  sectors.

At the same time, the international consultant on public finance  management does not share the view that the economic growth  indicators recorded in recent years (2021 GDP grew by 5.7%, 2022 - by  12.6%) indicate an increase in the generation potential GDP in  Armenia, which, as previously noted, according to various estimates,  is approximately 4-4.5%.

In order not to make value judgments on this issue, the economist  calls for focusing on the presence or absence of investment, the  production of competitive products, the directions of export of the  same services, and the presence of potential for maintaining growth  along this line in the future. "The backbone of the country's  economic potential is exports, the ability to export goods and  services produced in the republic - all other things being equal, and  not in shock situations," concludes Vardan Aramyan.