According to the official information, during the first half of this year the economy has grown by 6,7%. According to the national statistics, the growth rates of construction, export and import, as well as the service sector have stayed the same. However, the sector of agriculture has slumped by 13,1%. During this month the rate of economic development fell down by 2%. The growth rate in may-June months was 8,8%. Does this mean that the economy is recovering and soon we will be able to return to the 12% development rate as we had before the crisis or we have to get ready for the third phase of the crisis as some experts say? We discussed these issues with the former minister of economy Armen Yeghiazaryan, who currently represents the Avag Solutions advisory company.
– Speaking of the economy of Armenia before 2008 you said that at that time we had cheap money and gold rain dropping from the sky. At that time we had up to 12% economic growth. In consideration of the crisis it seems that the growth rate of this decade is not bad either. Does this mean there is a tendency of economic recovery and development?
– Generally according to international standards, recession is considered to be over when there is development during the two consecutive decades. Now we have that growth. However we can’t say if we have overcome the crisis because people speak of another phase of the crisis. We can speak of this only in the end of this year. Now the government is doing certain things, i.e. they are doing what they can do or what they are allowed to do. Even if they want it much, they cannot do more. They are giving money to producers, banks, but this is not the problem. The problem is that the existing development model has faced some obstacles.
– Do you mean the fact that Armenia has become dependent on transfers from abroad?
– Yes, now the country depends on foreign financing but the question is that how long we can keep going through this way. If we are able to keep this way for hundred years and develop, it will be great. The money that arrives is spent here too. The problem is that whether we will be able to develop this economic model or no.
– In fact the agriculture sector has slumped during the first part of this year unlike the assurances that even we might export agricultural products to other countries. The other sectors have developed. What is the reason of this disproportional development of sectors?
– I think that one of the biggest factors in the sector of agriculture is the weather. The growth or slump may be conditioned by weather situations. I think that is very important to encourage investments in the agricultural sector of Armenia.
– Do you think Armenia is attractive for foreign investments now?
– Formally yes, but in the reality no. Currently businessmen are trying to be integrated with the government to secure their businesses, and those who succeed get privileges. Researches show that the biggest companies in Armenia are in the best situation, the medium ones are in good situation and the small ones are in the worse situation compared to the others. It means the closer relations you have with the government, the better situation is given to your business. Currently the business and politics are interconnected, which is certainly a negative thing.
– Were there such negative processes during your office as the minister of economy?
– There were but not so much because such things don’t appear suddenly. There were not so many negative things as now, but these things started at that time. It is the mentality of our people; we can’t bring someone from Switzerland.
– The biggest problems of our economy are the monopolies and shadow. We are speaking of these malformations for many years but nothing has been done to correct the situation. Recently the same thing happened in the market of eggs. Do you think it is possible to speak of development in such situation?
– First of all businessmen should not be represented in the parliament. If they are in the parliament, everything is messed up. Being represented in the power helps them to improve their businesses. The problem is that whether we will be able to develop with this model. It is clear that it will not help us develop higher than the mid level; we can’t become a developed country with this model.
– According to the minister of finance, till the end of this year the economic growth will reach 7-8%, and according to the state budget the growth is expected to be 1,2%. What do you think about the expected economic growth rates?
– The budget was made in 2009. Every three months the scenarios of world development are changing. It means that it is hard to give correct answers to questions when making the budget, especially after a slump. But if the growth rate is 6,8% now, usually in the end of the year the production capacity grows. We have had continues economic growth during 14 years, and always the growth rates were higher in the end of the year. In consideration of this tendency, I think in the end of this year the growth rate will reach 8-9%.
– Do you think Armenia can return to the same level as before the crisis? When may it happen?
– It is a simple calculation. If we had 15% slump, and if we have 8% development during these consecutive two years, we will reach the same level as we had before the crisis. Even if there is another phase of crisis, it will result only in reduction of money inflows in our country. Our banks and companies do not have too many debts.
– Maybe the banks and companies don’t have many debts but the government has a lot of foreign debt.
– The foreign debt that used to be 16% is reaching 50% now (in relation with the GDP – G.S.). But the permitted limit is 60%. In the world economy this limit is considered to be normal and I think we will be able to cover the foreign debt normally if it does not exceed this limit. 50-60% foreign debt is not that dangerous. Of course the more debts there are the more problems there may be, but according to standard rates the situation is not that bad.