ArmInfo. Despite the aggression unleashed by Azerbaijan on the sovereign territory of Armenia since September 13, the growth of the Armenian economy by the end of 2022 may almost double the 7 percent figure envisaged by the state budget.
Head of the Chair of Management and Business at Yerevan State University Karlen Khachatryan made such forecasts in an interview with an ArmInfo correspondent. According to him, such a forecast is conditioned by the current trends of the economy, that is, a significant increase in economic activity in January-August at the level of 13.9% and the continued inflow of relocators and their capital into the country.
"Yes, it should be accepted that this significant growth is largely due to external factors - the Russian- Ukrainian conflict, as a result of which since March of this year, a large number of business relocators have arrived and continue to arrive in Armenia, which stimulates the inflow of a significant amount of capital", the expert emphasized, referring also to the emerging structure of economic growth, in particular, to the fact that in January-August 2022, the lion's share of GDP growth accounted for the service sector- 27.1% and the trade sector - 13.6%.
The military aggression of Azerbaijan against the sovereign territory of Armenia could have its negative impact on the growth rate of the economy, however, according to Khachatryan, the expected increase in the influx of Russian citizens due to the partial mobilization announced in Russia since September 21, as well as the fact that the conflict between Russia and Ukraine, most likely will not be resolved in the coming months, suggests that the positive momentum in the Armenian economy will be maintained. "At this stage, this factor prevails over the possible threat of war in the RA," he pointed out.
At the same time, according to the expert, partial mobilization in the Russian Federation, which indicates an escalation of tension in relations with the West and, as a result, a more critical situation in the Russian economy, will negatively affect both the volume of remittances of individuals and the volume of foreign trade. <In the structure of Armenia's foreign trade, the share of the Russian Federation accounts for almost a third of export-import, and transfers from the Russian Federation make up about 45%. However, since the movement of capital from Russia to Armenia will be largely provoked by the mass arrival of Russians who evade mobilization, this will lead to an increase in demand in certain areas, which will positively affect the Armenian economy, given its small volumes>, the economist explained.
As a result, an increase in demand will certainly increase inflationary pressure, the expert notes. But at the same time, it will contribute to the revaluation of the dram, which will restrain inflationary rates. As a result, according to the expert's forecasts, by the end of 2022, inflation in Armenia will reach 10% with a plus/minus 1% deviation.
However, as the expert noted, the current "comfortable" environment for Armenia's economy is still temporary, because growth is not supported by systemic development and institutional shifts, but is only the result of coincidence of random factors. "After the end of the conflict, Armenia may find itself in a diametrically opposite situation, since this time period is not used by the RA authorities to form reserves and "airbags" and is not accompanied by key reforms. The government observes the dynamics of the economy under the influence of external factors only from the outside," Khachatryan noted.
As the economist notes, against the backdrop of the devaluation of the US dollar, the government could not get enough of the fact that this leads to a decrease in inflationary pressure on the economy. Meanwhile, this jeopardized Armenian dollar exports, making it uncompetitive in foreign markets. "It turned out that the authorities preferred a reduction in inflation in the short term to the potential of the export-oriented sector in the long term, which is fraught with problems for the Armenian economy over the next 1.5-2 years," he noted. In the meantime, the authorities had to develop targeted mechanisms to support the sectors most affected by the revaluation of the dram.
In addition, according to Khachatryan, against the backdrop of rising inflation and a decrease in the purchasing power of the population, the Cabinet of Ministers had to develop targeted support and incentive programs. "Yes, inflation is inherent in the whole world today. However, as world practice shows, many countries are indexing pensions and benefits, and additional funds are directed to support socially vulnerable groups. In our case, nothing of the kind was done. The authorities only announced that pensions will be increased by 3 thousand drams from September 1. It is obvious that a 7% increase in the minimum pension does not make any difference if the Central Bank of the country itself forecasts a y-o-y inflation of 10.3%," Khachatryan said.
At the same time, the economist does not believe that the reluctance of the Armenian government to index pensions and benefits and implement other support programs is due to the fear of overheating the economy and the inability to service increased social spending, which, in the absence of current external impulses, in the future may lead to a sharp increase in the budget deficit and debt load. "The current government almost doubled the public debt over the course of 4 years, which today is close to $10 billion. At the same time, the executive branch did not even think about how to "tighten its belts", for example, to reduce bonus payments and maintenance costs state apparatus. Therefore, it is unreasonable to talk about the caution of the current Cabinet of Ministers regarding the increase in the state budget deficit and the size of the state debt;" the Head of the Chair of Management and Business at Yerevan State University concluded.