– The national statistics service has published the preliminary macroeconomic information for the first 7 months of 2009, according to which the economic decline reached 18.5%. Did you expect such harsh slump?
– In the end of 2008, when the parliament adopted the budget of 2009, I announced that we would have a double-digit decline up to 20%. I made my calculations based on the negative tendencies in the economy. Generally in the recent time there is a process in our economy, which is a coincidence: the macroeconomic rates of every year are the same as the rates of the last three months of the previous year. In the last three months of 2008 the economic decline reached 20% compared to the previous three months. As for the rates of the seven months of this year, this rapid economic decline was surprising for me as well, even though the factual information published concerning the sectors of the economy in March mainly coincided with the rates of the first 7 months. There was some stray in two sectors: first, there was some growth in the sector of trade and services during these 7 months, which is surprising because the import capacity in the mentioned period reduced by 1/3 times, and the industry – by 12%. It means that such growth in the sector of trade was conditioned by the efforts and activities targeted at cutting down the shade in the economy, including the use of cash machines, which cannot last long. The second one was the rapid decline in the sector of construction (more than 50% against the expected 30-35%).
– According to your opinion, what will be the indexes in the end of 2009?
– The annual indexes will be better than the indexes of these seven months; I think the annual index of economic decline will be about 12.5-13%. However it will not be a result of positive tendencies in the economy or the government’s so-called anti-crisis policy. The GDP decline capacity in July 2009 was so big because we had a high growth index in July 2008. As in August 2008 the GDP growth was small because of the Russian-Georgian conflict, the GDP reduction in January-August 2009 will be lower than 18.5%. According to the same logic, as in the last three months of 2008 there was 20% decline compared to the previous three months, even if the decline reaches 17-18% compared to the previous period during the last three months of this year, this year the government may even report growth compared to the same period of past year. However this is not growth because the reason is the fact that the GDP was smaller in the end of last year.
– What do you think about the work of the operative headquarter adjacent to the government? Would it be worse if this headquarter did not exist? It has already provided guarantees worth of 10 million to construction companies, discussed business plans and adopted important decisions.
– Certainly it is not bad because it is good when they do good things. However let’s understand the amounts these decisions would cost. The mentioned 10-15 million, even 50 million, is a very small amount for the period of January-July. The mentioned decline of 18.5% is equal to 300 billion dram (about one billion dollar). Ten million is a very small part of this huge loss. Even now when we deal not with problems in certain sectors but system issues. I have numerously said that our state is seriously sick and this sickness is corruption and monopoly. The economic system that was created during the past ten years is far from being liberal. The destiny of businesses mostly depends on the wish of oligarchs and state officials, there are no rules of game and the risks are too big. The economic policy should be activated, system reforms should be implemented, and the existing problems and criminal infrastructure should be worked out. The possibility of fighting the crisis successfully depends on the solution of such problems, however the government is not doing anything for this purpose.
– According to Tigran Sargsyan, as this year the share of income tax in the budget compared to the previous year is bigger as a result of economic decline, it means that the shade in the economy is being cut down as well. Do you agree with this observation?
– Of course it would be good, but let’s see whether the income tax has grown or the other taxes have been decreased. I think that as a result of significant decrease of import the capacity of VAT and excise tax collection has drastically decreased as well, as a result of which the share of income tax has increased spontaneously. Is it adequate to this situation? I don’t think so. Has the role of monopolies changed? Don’t they drive the rules of the game any more? Of course no…
– Will the government be able to escape from making sequestration of the budget of 2009?
– I don’t understand this issue. Sequestration is the policy of cutting down the expenses with the same capacity as the reduction of the budget incomes, which has not been done. However the entire format of the budget was changed and now it has another conjunction and format other than provided by the law. By the way, this was done in close conditions, by ignoring the law and the legislative body. Tell you frankly I am surprised why the government wants to take on such a big responsibility. The economic situation has changed, the budget incomes have reduced, and they are trying to fill this gap with external borrowings. It means that the ideology of the budget itself has changed. If so, why does the government say that they are not thinking of changing the budget? In other words budget is an agreement between the government and society. That is why the process of budget adoption is such a detailed and difficult process. Now the government decides in close conditions which expenses to cut down or delay, what incomes to add, etc. The results of such approach will be worse. The budget process is like some culture. The fact of losing this culture is more dangerous to the economy, society and state.
– What do you expect in 2010-2011?
– It’s a pity that next year the economic decline will continue too. I think that it will reach 2%. We can expect growth of the economy maximum in 2010, which will not be more than 1-2%. I would like to mention that we will return to the situation before the crisis maximum in 4-5 years. It means that the efforts of both the government and the society should be targeted at anti-crisis activities, including the creation of a five-year anti-crisis plan. In other words, if someone says that specific actions should be taken to solve some problems, it won’t happen. Such plan should be a complex and long-term plan.