Last week, the RA National Statistical Service (NSS) came out with a list describing the social-economical situation of micro-economical factors, where it was written that during the course of January-June 2006, Armenian economy had grown by 11.8% compared to the same period last year. However, the NSS wasn’t able to register a growth rate for January-April consisting of two figures and the mark was 9.8%. As for the rapid growth in the following months, this was due to the growth in the fields of agriculture and construction.
In June, agriculture grew by 68,4% compared to May, while construction grey by 25.6%. The growth mark in these two fields was almost the same in May. It is clear that the growth marks of these two fields are enough to register the two-digit mark. However, there are some doubts that the economy grew so fast in a month and it seems as though the statistical service is trying to stop the economy from going down with the help of their statistics. In early 2006, agriculture grew by 7,2% compared to the same period of the previous year and construction went up by 31.8%. But if we look at these figures one by one, we will see that the economical growth that they talk about is phony. It is just a good combination of numbers. It would be better if we could actually see that development.
Let’s focus on construction. On the one hand, we have seen construction grow at a rapid pace during the past couple of years. On the other hand, even little growth may cover high percentage compared to zero. It seems that this year construction don’t tend to increase; contractors continue their construction but they don’t make new holes for constructing new buildings there. Besides that, you can see that the growth rate of this field is insignificant when taking a look at all the taxes that contracting companies pay. For instance, “Mika Cement” company, which is the largest cement-producing company in Armenia, paid only 7,5 million dram to the taxation bodies during the first trimester of 2006. Besides that, “Glendale Hills” company, which is constructing new buildings in the heart of Yerevan, is not included in the list of the biggest 1.000 tax-paying companies of Armenia. As for agriculture, June is the heavy season and it was expected to see a rapid growth. However, harvest was not as good as last year, furthermore, the ministry of agriculture says that some vegetables were rotten due to the heat and prices were high in the markets. On the one hand, it seems that statisticians didn’t know that. On the other hand, they say that they were given that information and numbers by the agriculture ministry. It turns out, that the ministry of agriculture gave overstated marks to the statistical services.
Despite all that, specialists say that even if Armenia had an 11,8% economical growth during the first half of the year, it is too low for a country like Armenia.
“The number of money transfers that Armenia receives from abroad exceeds Armenia’s budget by one billion dollars”, says economist Edward Aghadjanov, “Only a small part of that money is spent on capital needs. Most of that money is spent in the consumer market. People exchange their foreign currency and buy goods or services. The more people spend, the more production grows. But the exchange rate policy of the recent years has led to huge losses; its 40% inflation is the reason why we spend more for the same number of goods and purchase the same goods and services. However, money transfers reaching one billion had to lead to an economic growth mark not covering 11, but 30%. If Azerbaijan uses its oil and provides 40% economic growth, we have an opportunity to use that transferred money effectively and cut down corruption levels, thus be able to provide that much growth too. Now it turns out that if we didn’t receive those transfers we would only provide 2-3% economical growth”.
The next interesting thing stated in the statistical report states that during the first half of this year, the negative balance of our foreign trade has increased by half a billion and covers $514 million. This means that we imported more products for an extra half billion dollar than we exported. This also means that production levels have been cut down. The statistical services say that production levels decreased by 1% only. Due to the fact that USD exchange rates went down by almost 40%, currently production in Armenia is less competitive both abroad and in the domestic market. If the exchange rate keeps going down at this rate, production in Armenia will face a crisis and our negative balance of foreign trade will reach one billion, i.e. it will exceed Armenia’s budget.