AMC published the TAC for January-May 2019: 6.8%. We have a serious decline. there is no agriculture here (down by 8%), and the share of 2 toxic branches (games and car sales) has increased even more, former RA Prime Minister Hrant Bagratyan wrote about this on his Facebook page.
“Taking them into account, we are in the range of 3-4% GDP real economic growth. The import and sale of cars will not happen soon, but how long can the unrelated growth of games continue? Budgetary problems will gradually deepen, and the dram exchange rate will become problematic from the new year (we had predicted it earlier, but it was postponed for a year due to the unprecedented, but, alas, temporary volume of car imports and sales). The only consolation is the small positive movement of the processing industry and exports. Low inflation is problematic for the economy.
Don’t wait for investments in the conditions of low inflation and dram appreciation. Consumption is almost equal to GDP. All of this is facilitated by the government’s unclear policy in matters of foreign state debt. What was the need to reduce it, when from August 14, 2019, for the first time in human history, the 10-year bond rate (1.57) is lower than the 2-year bond rate?
In about 1 dozen developed countries, the interest rate set by central banks is less than or equal to 0. Neither the US nor the EU have the opportunity to stimulate the economy in other ways than by handing out free money. And under these conditions, we decide not to borrow. Instead of at least paying off old high-interest debts with new debts, make investments (of course, on new elements of the main capital, and not on repairs and consumer expenses, as during Serzh Sargsyan’s reign).
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Interview: Navigating Economic Uncertainty in Armenia with Hrant Bagratyan
Time.news Editor: Welcome, everyone, to this engaging discussion on the current economic outlook for Armenia. Today, I’m joined by Hrant Bagratyan, former Prime Minister and renowned economist. Hrant, thank you for joining us.
Hrant Bagratyan: Thank you for having me. It’s a pleasure to be here and discuss this important topic.
Editor: Let’s dive right in. You recently highlighted some concerning economic trends in Armenia, especially with the reported TAC of just 6.8% for January-May 2019. What are your thoughts on this decline?
Bagratyan: Indeed, the TAC figure reflects a serious decline. It’s particularly troubling because it coincides with a significant drop in the agricultural sector, which is down by 8%. Agriculture has always been a backbone of our economy, and without its stability, we are seeing a broader economic strain.
Editor: You mentioned the increase in two toxic sectors: games and car sales. Can you elaborate on how these industries are affecting the overall economic landscape?
Bagratyan: Absolutely. While the gaming industry may present short-term gains, it doesn’t contribute to sustainable economic growth like agriculture or manufacturing. Additionally, the car sales boom we’ve seen is unsustainable. With the import and sale of vehicles likely to decline soon, we’re left questioning how long the unrelated growth from gaming can continue to offset these losses.
Editor: That’s a compelling point. You also mentioned budgetary problems that could deepen. What specific challenges do you foresee, particularly regarding the dram exchange rate?
Bagratyan: The budgetary issues are tied closely to our economic growth trajectories. With a predicted stabilizing economy, we may face a problematic exchange rate for the dram next year. While we temporarily benefitted from an influx of car imports, that volume has masked deeper, underlying issues that we can no longer ignore. The recent low inflation rates, while appearing positive on the surface, hide complexities that can be harmful in the long run.
Editor: So, what would you identify as the main drivers for growth going forward, especially in light of the challenges you’ve mentioned?
Bagratyan: The processing industry and exports are showing some positive movement, albeit small. That’s where we should be focusing our efforts. Strengthening these sectors could provide the foundation for comprehensive growth. Unfortunately, there’s a reluctance from investors to commit to meaningful investments at this point, largely due to uncertainty.
Editor: Given these insights, what advice would you give to policymakers to navigate these economic challenges more effectively?
Bagratyan: First, there needs to be a concerted effort to revitalize the agricultural sector, as it directly impacts employment and the overall health of the economy. Second, we should encourage innovations in the processing industry and export development. creating a conducive environment for foreign investments, with clear policies and incentives, will be crucial to stabilizing our economy.
Editor: Thank you, Hrant, for sharing your insights today. Analyzing these economic dynamics is vital for our understanding. We appreciate you joining us.
Bagratyan: Thank you for having me. I hope this discussion sheds light on the challenges and opportunities we face.
Editor: And thank you to our audience for tuning in. Stay informed with Time.news for more analytical discussions about pressing economic issues.