As we have mentioned in our previous publications, the recent inner political events have affected the economy of Armenia. Specifically, several days ago the minister of trade and economic development Nerses Eritsyan came up with facts and predictions concerning tourism and investments. However, the problems are not limited with these fields only as the sectors of the economy are interconnected.
Let’s speak about inflation first. Even the official statistics services have informed that the growth of prices in February compared with December of the previous year amounted at 3.4%. The same indicator amounted at 2.6% in 2007, and 2.7% – in 2008. The corresponding services have not published these indicators for March, but it is clear that the inflation is growing. For instance, the Protection of Consumers’ Rights NGO has received a number of complaints and letters from citizens stressing that the prices of goods have grown. Several days ago the chairman of the competition protection state commission Ashot Shahnazaryan said that the prices of about 10-15 types of products of first need have grown. The latter said that the growth of prices was stipulated by the growth of prices in the international market and emphasized that the tendency of growth in Armenia is twice slower than in the international market. Nerses Yeritsyan, who was participating in the press-conference as well, said that the prices of bread have increased by 8-15%, flour 11-15%. The prices of oil, butter, rice have grown as well. He explained this growth in the markets of oil, rice and butter with world processes, specifically with the misbalance of support and demand. “The prices of grain import have not changed. We have found out that the sellers have not changed the prices offered by them either. The prices have been changed in the retail sale market,” said Yeritsyan and added that the prime minister had instructed them to analyze the relations between grain and bread and report on the processes that are happening in the market and develop recommendations.
However, the prices of goods and products are still growing. We have met with some owners of small shops, who brought several examples to us to describe the situation in the market. For instance, before the elections shops used to buy one kilo small paper pack at 220 dram, some time later it was increased to 250 dram, and now – to 300 dram. The price of macaroni made of flour has been increased to 200 dram from 170 dram. As for bread, the producers are using an old mechanism to gain profits, specifically they are cutting down the weight and letting the price be the same. The prices of rice, beans, egg, chocolate and other products have grown as well. This tendency is growing and covering other fields of the economy as well. The growth of prices in the market of fuel will bring to a chain reaction and will result in price increase in other fields as well. By the way, according to the international media the prices of oil have fallen during the recent period. Notwithstanding this fact the prices of fuel have grown by 10-20 dram per liter.
The Central Bank of Armenia, which main function is to regulate inflation, has explained this situation with external factors as well, “In February the external sphere continued to impose inflation pressure on the inner economy. The prices of almost all raw materials have exceeded the predicted levels. Accordingly, the international prices of oil are exceeding the psychological limit of 100 dollar per barrel both for the Light Sweet type of oil, which prices are settled in New York, and Brent type, which prices are settled in London”.
It is very interesting that the growth of prices in the world has coincided with the presidential election in Armenia. Even if we confess that this process is not connected with the electoral factors, there are things which are directly connected with the election and post-election processes.
We have already written about tourism, investments and even the opinions of many businessmen about business activities. The head of the producers’ and businessmen’s union Arsen Ghazaryan emphasized that the capacity of cargo transportation had fallen by 10-15%. Certainly this indicator concerns the pre-election period and in some cases we can surely say that the situation in the business environment cannot become better until the inner political situation is stabile again. For instance, the head of the Armenian representation of the Synopsis company Hovhannes Musayelyan said to our correspondent that their company was concerned of its local staff and the recent events were a serious risk factor for them. As for risk, usually planned activities are suspended and frozen in case of any risk of the business.
The situation is frozen in the real estate property market. However, it is a strange thing that the prices of real estate properties have started growing again. Basing on the fact that the prices of construction materials are growing we may assume that the prices in the real estate market will grow as well.
As for the banking system, the capacity of banking transactions has been cut down, which means that the overall activity of the economy has fallen. The capacities of money transfers to Armenia have been cut down too. If this process continues, it may bring big risks and danger for the gross domestic product of Armenia since a big part of it is formed of such money transfers.
Plus, if the Millennium Challenges program is suspended, the situation will become very bad.
This danger does not concern only the monetary side of the problem, but also the social situation. There are rumors that many employees of companies, especially hotels and such relative companies, have been sent to compulsory vacation for some time.
It turns out that now we are in the opposite situation than promised by almost all the candidates, i.e. they promised improvement but we are faced with stagnation. Stipends and salaries may grow too, but taking into consideration the fact that the prices are growing too fast people will be able to buy only bread with the money they receive. If this situation is a result of instability in the country, it will tend to more cynicism, which in its turn will result in a deeper instability. Alas we have appeared in a deadlock, the exit of which cannot be seen at this point. This should be a reason for everyone to think about the existing situation, and first of all the authorities are the ones to think about this situation as they have tools of management. As for this management practices, it does not mean strong tools of influence only, but also an ability to create a normal environment (political, economic, moral and psychological) so that people at least want to stay here and work. Certainly the national statistical services can eventually draw good figures and numbers, but it is time to realize that you cannot lie or manipulate anyone with such figures. The authorities should propose specific solutions and offer steps to overcome the existing crisis.