Wednesday, February 21 2024 18:36

ArmInfo.The overall growth rates of Armenia's international trade turnover for 2023 are marked by unprecedented achievements, however, the structure of exports and imports, unfortunately, indicates the presence of significant imbalances and shifts containing significant long-term macroeconomic risks, Doctor  of Economy Aghasi Tavadyan told ArmInfo. 

The specialist recalled that over the past two years, significant  changes have occurred in the structure of Armenia's trade turnover.  In 2023, exports increased by a significant 55.3 percent, from $5.4  billion (2022) to $8.4 billion. At the same time, imports increased  by 40.2 percent, from $8.8 billion to $12.3 billion over the same  period. Over the past two years, exports and imports have increased  by 2.8 and 2.3 times, respectively. However, this is only the visible  side of the "big numbers". The problem is that if we "remove from  statistics", that is, purely mechanically exclude Russia, the United  Arab Emirates and Hong Kong from trade turnover, then the indicators  will begin to indicate a reduction in the growth rate of imports and  a reduction in Armenian exports by as much as 12.2%.

Official statistics show that in 2023, 34.4 percent of Armenia's  exports went to the United Arab Emirates (UAE) and Hong Kong. The  specialist notes that in 2021, before international anti-Russian  sanctions, only 2.8 percent of exports went to the UAE and Hong Kong  ($84 million).

"In fact, we have a 35-fold increase in exports to the UAE and Hong  Kong over the past 2 years, and this, in principle, could have  happened solely due to the rapid growth of re-exports, and has  nothing to do with goods of Armenian origin, because the same  statistics indicate more than a modest increase in domestic  industrial production in 2023 at 4.1% and an absolute decrease in the  mainly export-oriented agricultural sector by 0.3%. Moreover,  statistical data indicate that the UAE and Hong Kong played a minimal  role in the dynamics of Armenia's imports, which mainly came from  Russia," the expert said. To support his words, the economist cited  data that, for example, until 2021, the traditional main export  product in the Russian Federation was Armenian cognac, and in 2022-23  it was seriously surpassed by such goods as telephones, cars, medical  devices and radio equipment. Over the same period, exports of  machinery and equipment to Russia increased more than 10 times, and  categories such as chemicals, plastics, ceramics, glass and metals  grew more than 3 times. According to the economist, it was the  increase in re-export of machinery and equipment that significantly  contributed to the increase in exports. <Armenia has actually turned  into an export-import hub, indirectly connecting Russian business  with international markets through the United Arab Emirates and  China.

According to the economist, all of the above does not indicate a  stable growth of exports and imports, but speaks of a dangerous  lateral shift associated exclusively with the changing conditions of  international markets and new supply chains in today's geopolitical  turbulence, which, in principle, do not impart stability to the  Armenian economy, turning she is held hostage by external factors.

And yet, Tavadyan views the growth of exports to the EAEU countries  as a positive factor, despite the overall unsatisfactory level of its  diversification, which creates serious risks. Thus, exports to the  EAEU countries in 2023 increased by 42.9 percent (from $2.5 billion  to $3.6 billion). Russia will continue to remain the main trading  partner of Armenia and the share of exports to Russia is the most  diversified by product groups.

Exports to the Middle East in 2023 increased 2.6 times (from $1.0  billion to $2.5 billion), mainly due to re- exports from Russia to  the UAE. Exports to Greater China increased 2.8 times, also due to  re-exports from Russia to Hong Kong. Statistics show that at the end  of last year, the European Union took only fourth place in exports,  only 8.4 percent of export products were sent to EU countries. As the  analyst noted, despite the fact that Armenia's international trade  turnover has more than doubled over the past two years, a deeper  analysis reveals the main structural problems that call into question  the sustainability of this growth.  The 2.8-fold increase in exports  highlights the disproportionate dependence on two trading partners,  particularly the United Arab Emirates and Hong Kong, which have seen  a staggering 35-fold growth over the past two years. 

This surge, driven largely by re-exports rather than domestically  produced goods, highlights vulnerability to external market  conditions and geopolitical changes. Armenia's transformation into an  import-export hub highlights the precarious nature of current trade  dynamics. Despite positive aspects, such as increased exports to the  EAEU countries, the general lack of diversification of trading  partners creates serious long- term risks. Fundamentally, while the  headline numbers appear impressive, they do not reflect the deep  structural problems that require a closer look at Armenia's economic  stability and sustainable economic growth.