"Apricot Republic" Armenia expects second wave of crisis

Business Materials 22 October 2011 09:00 (UTC +04:00)
The fear experienced by the countries with weak economic systems is not alien to a small ‘apricot republic like Armenia, blocked on two sides by insoluble arguments with its neighbours.
"Apricot Republic" Armenia expects second wave of crisis

Trend European Desk Commentator Elmira Tariverdiyeva

The fear experienced by the countries with weak economic systems is not alien to a small 'apricot republic like Armenia, blocked on two sides by insoluble arguments with its neighbours.

Yerevan too, has learned from bitter experience of the impact of the financial crisis of 2008 and faces disappointing forecasts as the approaching wave of a second global economic collapse signals more destruction.

Prime Minister Tigran Sargsyan recently recognised that matters could now come to a head in 2012. The Mediamax agency reported that the prime minister discussed this at a meeting of the EurAsEC Interstate Council in St. Petersburg.

Of course Armenia reflects back to 'Black Tuesday' in April 2009 and Yerevan looks nervously at what the next financial disaster might do.

The cause of the 2009 collapse was the Armenian Central Bank declaring a floating exchange rate of U.S. dollars which caused an unprecedented rush.

The dollar cost 305-306 drams on Tuesday morning and was sold for 309. These figures increased to 350 and 390 drams in the afternoon, respectively. After the sharp fall of the Armenian currency, the prices on pharmaceuticals increased. A number of pharmacies in Yerevan closed and when they reopened, prices on medicines increased by 20 to 30 per cent.

After the collapse of the Armenia's national currency, the dram, the state deteriorated whilst prices on fuel, sugar, oil and other essential commodities increased.
The memory of the terrible 'Black Tuesday' is supported by the current disappointing state of the Armenian economy. After the global crisis, it had not changed enough to help the country to overcome the negative impact of the second wave of recession.

Mr Sargsyan was quoted as saying: "The world financial crisis significantly hit the construction industry in Armenia in 2009.

"The decline was registered at 43 per cent, but the main issue of concern to us is a possible crisis expected in 2012. One should understand how it might affect our economy. Our consultations with the World Bank, International Monetary Fund and other international organisations do not give a clear answer to the question how the rest of the world will affect our economy."

Of course, Prime Minister is cunning. Yerevan does not want to believe in the points designated to Armenia by the international financial institutions.

In his recent interview with ARKA agency, member of delegation of EBRD Board of Directors Kurt Bayer answered all questions regarding the sad future of the Armenian economy.

Stressing that the Armenian economy got a painful blow during the crisis, Bayer said that the economic recovery proceeds rather inertly.

"This testifies to the fact that the economy has structural inefficiency," he said. "This made it very vulnerable given the negative development of the world economy."

According to the EBRD representative, many potential foreign investors say that Armenia is perceived as a country with high level of corruption. The rule of law is not sufficient in the country and that people whose economic rights are violated, can not to seek protection in the court.

All this means that the second wave of crisis may affect the economy of the apricot republic which has not recovered after the first wave of crisis. It is fragile because of isolation from all transportation projects in the region.

There are all conditions that Prime Minister Sargsyan's anxiety justified.

According to the Armenian National Statistical Service, consumer prices increased by 10.6 percent in Armenia in 2010. The largest price increase - 13.1 percent was registered for food, that is, the social welfare sector, without which it is impossible to do. Prices on industrial goods increased by 5.6 percent, tariffs for services - by 4.2 percent.

The poverty rate has already reached 35 percent. This made 60,000 people to leave Armenia last year. The level of habitation continues reducing and threatens to turn into a revolution to overthrow the power. Moreover, the current power in Armenia does nothing to try and help people. As a result of the governmental policy and a lack of real market competition, small and medium facilities are closed. This significantly affects the public due to the increase in prices and the monopolization of the economy.

In this situation, the second wave of crisis could be the last blow to the Armenian economy.