2024-08-03 07:29:38
Author: Leila Tariverdieva
Fitch Ratings affirmed Armenia’s rating at ‘BB-‘ with a stable outlook.
It should be noted that the Fitch rating scale is divided into “Investment Grade” and “Speculative Grade”. The “BB” level refers to the latter and is assigned to countries with a creditworthiness level below sufficient. For comparison, Azerbaijan has been assigned a “BBB-” rating, which implies a sufficient level of creditworthiness and compliance with the investment class.
The rating agency sees 6 percent growth in the Armenian economy this year. The results for the next two years are slightly lower: 5.5 percent in 2025 and 5.1 percent in 2026. The Armenian economy is forecast to continue growing, especially in tourism and ICT.
The European Bank for Reconstruction and Development also sees the near-term outlook for the Armenian economy in rosy terms. Initially, economic growth was forecast at 5 percent for 2024, but the EBRD then raised the bar to 6.2 percent. The forecast for 2025 is cautious – 5 percent.
As reported by Armenian media, at the final press conference following the EBRD annual meeting and business forum held in Yerevan in May, the bank’s leading economist Beata Javorcik explained that the bank took into account the change in factors influencing the economy related to the influx of foreign citizens, in particular Russians, many of whom are qualified programmers. They have changed Armenia’s IT sector not only quantitatively but also qualitatively. According to EBRD specialists, a factor positively influencing Armenia’s economic indicators is… the influx of voluntary migrants from Karabakh. State spending on their needs, entering the economy, will stimulate the consumption of goods and services, according to Beata Javorcik.
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Fitch Ratings also believes that Armenia’s economic growth has been and continues to be driven by relocators from Russia, Belarus and Ukraine, as well as Karabakh migrants, who are actively involved in the country’s economy as consumers, labor force and businessmen. In addition, the Amulsar mine is scheduled to start operating in 2025.
So, here’s what we have. The Armenian economy has grown and will probably continue to grow thanks to Russian relocates with brains and money and nimble settlers from Karabakh who are squeezing businesses out of the locals. Note that none of the speakers talk about growth in the real economy. Services, tourism, IT. According to some data, the number of IT specialists in Armenia has increased several times since the start of the Russian-Ukrainian war, which has contributed to the revival in this area. The country that calls itself almost the Silicon Valley of the region, it turns out, was nothing in this regard until the Russian IT specialists arrived.
Suspicions that something was wrong with the Armenian economy appeared by the end of 2022. First, the EBRD made Armenia a leader in the South Caucasus in terms of economic growth, then the World Bank pleased Armenians by estimating the country’s GDP growth in 2022 at 10.8 percent, which was even 3 percent higher than the forecast. Incredibly, the GDP growth in Armenia turned out to be the highest among the countries of Europe and Central Asia. This was a shock for everyone else, and Armenians had already experienced shock when they themselves summed up the economic results of the year. State budget revenues amounted to $5 billion, which no one had predicted at the beginning of 2022, and the GDP, which was predicted at 1 percent, jumped to 15. Inspired by such success, Armenian economists began to make optimistic forecasts for 2023. GDP growth was predicted at 7 percent, and budget revenue growth at 18 percent. At the same time, no one predicted growth in industry or the extractive industry. The same services, tourism, restaurants, hotels, IT.
Back in 2022, sensible economists warned Armenians against euphoria, pointing out that Russian relocators, who were the real reason for the fantastic rise in indicators, would leave sooner or later. The war in Ukraine will end someday, peace will reign, and it is unlikely that any of the Russians who moved their businesses to Armenia will stay in this country. Both companies and money will leave.
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The Armenian leadership, not understanding that the country is heading for the abyss in such a situation, is trying to present these “achievements” as the merit of its government and its economic policy. The euphoria continues. The economy is actually at a standstill, but Armenia’s GDP in the first quarter of 2024, according to the RA Statistics Committee, grew by 9.2 percent, to about 1.97 trillion drams (4.8 billion dollars)!
Foreign experts say sarcastically that they have not even seen such an “economic miracle” in China. Armenian expert circles have calculated that the real growth in the first quarter of this year is within 6 percent, not 9.2 percent. Economist Haykaz Fanyan told reporters that a 31.1 percent growth was recorded in the manufacturing industry, which is mainly due to the re-export of jewelry. Due to this, export volumes from Armenia increased by 55 percent in 2023. The main export destinations are the United Arab Emirates and Hong Kong, and the country of origin is Russia.
Interestingly, in 2023, Armenia exported 4.5 million carats of diamonds, which is 30 times more than the country produced itself!
Re-export and circumvention of anti-Russian sanctions is a special point in the “miracles” of the Armenian economy.
In May, at a meeting of the Eurasian Expert Club, Armenian expert Aghasi Tavadyan noted that previously, Armenia’s main export item to the Russian Federation was cognac, but since 2022, “there has been a transition to technological products.” Now Armenia exports telephones, cars, medical devices and radio equipment. Over the same period, the export of machinery and equipment to Russia increased more than 10 times, and the export of chemical products, plastics, ceramics, glass and metals – more than 3 times. The increase in re-export of machinery and equipment significantly contributed to the growth of exports, the expert noted with satisfaction.
That is, Armenia exports today mainly what it does not produce. And it calls it not re-export, but export. Like the same re-export of cars. Even after Georgia, obeying the sanctions regime, banned the supply of cars to Russia through its territory, the cunning Armenians came up with a way out. A whole scheme for customs clearance and the transfer of “private” cars to Russian territory has been developed.
Not long ago, Prime Minister Nikol Pashinyan called suspicions of Armenia or Armenian companies’ participation in schemes to violate the anti-Russian sanctions regime “nothing more than talk.” But the situation is so obvious that the Armenian prime minister would be best off modestly keeping quiet. And start actively thinking about what will happen to Armenia’s economy when the relocators leave.