Economist: one should not expect serious economic growth in Armenia  without industrial development in mid-term

ArmInfo. There is practically no policy aimed at developing high value-added industries in Armenia.  This, in fact, is evidenced by the data of both the RA Statistical  Committee and the list of the largest domestic taxpayers. Doctor of  Economic Sciences, Professor Ashot Tavadyan expressed a similar point  of view in an interview with ArmInfo.

He stressed that in H1 2023, economic growth indicators in Armenia  decreased slightly compared to the same period last year. Meanwhile,  in comparison with the banking and construction sectors, the industry  is growing very slowly, the growth of which was 1% alone in Jan-June,  which is a very low indicator against the background of the general  growth in economic activity. Meanwhile, industry is the key factor in  economic growth. We cannot help but worry about the volume of  exports. Recently, data on the implementation of the state budget  were presented, according to which the revenue side of the state  budget increased by about 20%. "In this regard, I specifically draw  attention to the TOP-5 largest taxpayers in the country. Of the five  largest taxpayers, only one - "Grand Tobacco" produces finished  products. The others - Zangezur Copper-Molybdenum Combine (ZCMC),  Gazprom-Armenia, Ameriabank and Ardshinbank either export raw  materials, or import them, or provide services, which indicates  problems with the economic structure," the economist noted.

He stressed that ZCMC CJSC's deductions to the state treasury  amounted to 34.8 billion drams, which is 66.8% less than last year.  Referring to the data of the ZCMC company itself, Tavadyan noted that  the decrease in tax deductions by the enterprise is due to two main  factors: the first one is the termination of the so-called additional  tax introduced by the government as a duty on the export of  concentrate in the face of high prices, which increased tax  deductions to the budget 2.5-fold and  the second important factor,  as noted by the company, was a significant (by 25%) revaluation of  the Armenian dram.  Nevertheless, today the enterprise has developed  a large investment and technological program, which will allow to  bring the production of ZCMC in the coming years from an average of  22 million tons to 40 million tons of concentrate per year. And in  this regard, the professor emphasized the importance of exporting  finished products, and not ore concentrate.

"Gazprom Armenia", as it paid in the first half of last year,  continued to pay approximately the same amount this year (30.6  billion drams, with a y-o-y decline of 7.6%). But we should consider  that its main consumer is the population, whose funds in the form of  VAT at 16% are automatically sent to the state budget. It turns out  that it is the population using the services of the company, and not  industry, that is the main driver of replenishment of the state  budget of the country.

In third place is "Grand Tobacco", which is very actively working in  the export direction. The company paid 20.2 billion drams to the  state treasury, increasing the transfers to the state treasury by 1%.

Against this background, a sharp increase in deductions by two  commercial banks of the country is curious.  In particular,  Ameriabank allocated 19.8 billion drams to the state budget, which is  more than 4-fold more than a year ago. Ardshinbank closes the TOP-5,  having paid 18.9 billion drams to the state budget (with a y-o-y  increase of more than 5-fold). According to the economist, such a  significant increase in deductions to the state budget from  commercial banks was caused by the flow of immigrants and a  significant increase in remittances. But in this regard, Tavadyan  pointed out the existence of such a problem as "tight money".   Despite a significant influx of financial resources from abroad, the  policy of "tight money" does not change. Inflation in the country,  according to official data (0.5% for June), is one of the lowest not  only in the EAEU region, but also in Europe, but at the same time,  the refinancing rate is quite high - 10.75%. "In the conditions when  only ore is exported, and high interest rates remain in banks, it is  very difficult to develop industry. As a result - marking time in  terms of industrial development. For this reason, no significant  economic growth should be expected in the medium term. Our country is  like a small boat, the direction of movement of which depends on  external winds, where it blows, we will sail there. The problem is  the materialization of both the ship itself and its engine, and for  this it is necessary to improve the skills of the entire management  team, otherwise, we will face serious problems >, the economist  noted.

He noted that the country should actively join the project of  industrial cooperation between the countries of the Eurasian Economic  Union (EAEU), which is entering the practical plane. The economist  noted that the formation of new joint ventures with the ability to  produce finished products will invariably lead to an increase in the  number of jobs. <Of course, the orientation of most of the exports of  Armenian products to the Russian market carries certain risks, but  the formation of such joint ventures will help offset the possibility  of secondary Western sanctions against Armenia. According to official  statistics, the unemployment rate in the country is 14%, but  according to the expert community, this figure reaches 20%.  It is  necessary to take the initiative so that the cash flows go to achieve  this goal. It is equally important to conduct a competent tax policy  and stimulate the development of monetary policy, which will also  solve the problem of financial stability>, Tavadyan emphasized.

"Of course, the professor believes, at present, especially against  the backdrop of a sharp increase in the export of Armenian products  to the Russian Federation, the risks of secondary sanctions are quite  high, and for this reason it is necessary to be careful, at the same  time "explaining to Western partners the benefits of Armenia's  participation in EAEU projects." According to him, Armenia has the  opportunity to receive energy resources at relatively preferential  prices, moreover, the fourth article of the EAEU Treaty mentions the  free movement of people, goods, capital and services, and if at least  one of these ceases to function, Armenia will face much bigger  problems.

"Of course, the EAEU has its pros and cons, but issues are being  resolved, and at the highest level. Heads of states gather and decide  something administratively. I am not a supporter of this method,  which often turns out to be ineffective, but sometimes it allows you  to avoid problems with partners in the EAEU>, the expert said,  pointing out the importance of working in other markets. Without  postponing the issue indefinitely, it is necessary to engage in  marketing work, thereby stimulating the development of various  sectors of the country's economy," the professor concluded.