Armenia as a part of global economy

PanARMENIAN.Net - The low level of GDP diversification is also mentioned among drawbacks in the RA government’s 2009 annual report.

When in Yerevan, Dr. Hilton Root, an academic and policy specialist in international political economy and development at George Mason University (GMU), pointed out to non-transparent activity of enterprises and complicated tax legislation in developing economies. Introduction of modern technologies and implementation of long projects would help attract investments, according to him. However, criticizing issue of bonds with high interest rates in some European states, (specifically Greece, Spain and Portugal), the economist was not aware that the interest rates in Armenia are much higher than in the above mentioned countries.

According to the International Monetary Fund’s (IMF) Regional Economic Outlook published late May, countries in the Caucasus and Central Asia (CCA) are seeing initial signs of recovery after being hit hard by the financial crisis in 2009,. The report forecasts the region’s overall economic growth to increase to 4.3 percent in 2010 after a 3.5 percent rise in 2009.

“The signs of recovery are there, albeit at an embryonic stage,” said Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department. “Exports have begun to pick up, the decline in remittances appears to be slowing or reversing, and capital inflows have turned positive. However, these trends are far from uniform and, in a number of countries, stress in the banking sector is holding back credit growth and weighing on economic activity,” Mr. Ahmed said.

As regards fiscal policies, the report notes that energy exporters have ample fiscal space but should consider exiting from accommodative policies as growth gains traction, to prevent the buildup of inflationary pressures. CCA energy importers, on the other hand, have limited fiscal space and should mostly be aiming for a neutral fiscal stance or modest fiscal adjustment in 2010.

Meanwhile, the UN’s World Economic Situation and Prospects (WESP) latest report says that “the world economy continued to improve in the first half of 2010, leading to a slight upward revision in the United Nations outlook for global growth. The pace of the recovery is too weak, however, to close the global output gap left by the crisis. The recovery is also uneven across countries. While growth prospects for some developing countries are encouraging, economic activity is lackluster in developed economies and below potential elsewhere in the developing world.”

The Armenian government said that the national budget was successfully executed in January-April 2011, with a deficit totaling AMD 9.3 bln against AMD 21.7 bln in 2009. Besides, the revenues grew by 19.6%.

So, Armenia’s GDP index and budget execution prompt the republic is surviving the crisis, but the growing state debt is creating new risks.