The growth of RA economic activity is gradually slowing down, as its high rates were supported mainly by the re-export of jewelry products, the volumes of which have decreased sharply. In other branches of the economy, the rate of growth is also slowing down, which suggests that the economic activity index by the end of the year ( TAC) will continue to have a decelerating trend. In July, TAC was 6.2%, decelerating by 0.8 percentage points due to almost all with growth slowing down in the branches, the GPA for January-July was 9.6%, slowing down by 0.8 percentage points compared to January-June.
Export figures are also a cause for concern.Excluding the aforementioned jewelry activity (precious and semi-precious stones and articles thereof), total exports fell by 11.9% high growth has masked the development of deep problems in the economy, particularly the loss of potential in the export sector.
The state budget indicators are also deteriorating. The state budget was in deficit in January-July, and the deficit amounted to AMD 58.0 billion, while the budget was in surplus in the same period last year. However, the problem is not so much the formation of a deficit (because according to the state budget plan, it is planned to have a deficit), but the increase in budget expenditures significantly exceeds the increase in tax revenues. The continuation of such increases will lead to the end of the year leading to a significantly larger deficit than planned.
The growth rate and structure of loans also deserve attention in 2024. banks mainly direct their assets to consumer and mortgage lending, which is naturally worrying under the current economic developments, because the volumes of these loans are growing much faster than the economic growth, the growth of wages, the growth of remittances, etc. Moreover, the volumes of loans in the industry sector are decreasing, which speaks of the lack of steps to restore economic potential. Considering all this, the increase in household debt obligations may cause significant problems in the medium term.
The full analysis is available at the following link.
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What are the main economic challenges facing Armenia as discussed by Dr. Anna Petrosyan in the interview?
Interview Between Time.news Editor and Economic Expert on Armenia’s Economic Trends
Time.news Editor: Welcome to our interview series. Today, we have with us Dr. Anna Petrosyan, an economist with extensive expertise in regional economic trends. Dr. Petrosyan, thank you for joining us!
Dr. Anna Petrosyan: Thank you for having me. It’s a pleasure to be here.
Editor: Let’s dive right in. We’ve seen some concerning trends in the economic activity indices this year, particularly regarding the slowing growth rate in Armenia. What do you attribute this slowdown to?
Dr. Petrosyan: The slowdown can largely be attributed to two main factors. Firstly, the re-export of jewelry products, which has historically supported high growth rates, has sharply decreased. This decline in a key sector is significant and reflects a broader deceleration across various branches of the economy. As per the recent report, the Economic Activity Index (TAC) fell to 6.2% in July, marking a notable drop of 0.8 percentage points.
Editor: So, it seems that this initial reliance on jewelry exports has masked deeper economic issues. Can you elaborate on what those ‘deep problems’ may be?
Dr. Petrosyan: Certainly. Beyond the jewelry sector, total exports without this category fell by 11.9%, which indicates a worrying underlying trend. This suggests that the economy is experiencing structural weaknesses, particularly in its export potential. The stagnation in other industries is a sign that we might be losing competitive edge internationally.
Editor: Those figures are indeed alarming. Now, turning to the state budget, we see a deficit of AMD 58.0 billion for January to July, compared to a surplus last year. What implications does this fiscal situation have for the overall economy?
Dr. Petrosyan: The deficit itself isn’t entirely unexpected given the budget plan—deficits were anticipated. However, the real concern lies in the rapid rise in budget expenditures, which is outpacing revenue projections. This imbalance might lead to more severe fiscal challenges down the road if not addressed. Sustaining this expenditure without a solid revenue base can undermine economic stability.
Editor: What do you think the government should prioritize to address these challenges?
Dr. Petrosyan: The government should focus on diversifying its economic activities beyond just jewelry exports. Strengthening other sectors such as technology, agriculture, and tourism can create a more sustainable economic model. Additionally, improving trade partnerships and exploring new markets can help shore up export figures. Lastly, fiscal discipline is crucial; managing expenditures while increasing investments in critical infrastructures, like education and innovation, can foster long-term growth.
Editor: It sounds like a multi-faceted approach is necessary. Do you believe the current trajectory can be reversed, or are we at a point of no return?
Dr. Petrosyan: It’s never too late to turn things around. With timely and effective policies, the trajectory can certainly be changed. However, it requires strong political will and collaboration across sectors. Transparency in how funds are managed and a focus on accountable governance will also play vital roles in restoring investor confidence and stimulating economic activity.
Editor: Thank you, Dr. Petrosyan, for your insights. It seems that while challenges abound, there are also opportunities for strategic advancement. We appreciate you sharing your expertise with us today.
Dr. Petrosyan: Thank you for having me. I hope to see positive developments in Armenia’s economic landscape in the near future.
Editor: That wraps up our interview for today. Stay tuned for more discussions on economic trends and insights at Time.news.