No long-term economic development plan

09/10/2010 Babken TUNYAN

Everyone knows that the Armenian economy is developing spontaneously. As a result of certain processes the economic indices are getting a concrete shape, after which the government proudly announces that it is what they wanted and had planned, which was the best development scenario.

For example, for last year they had foreseen 9.2% development but indeed the economy clumped by 14.2%. Later they took this lesson and for 2010 they planned 1.2% development, but the growth rate reached 8.8% during the first five months. These indices inspired the government and they planned 4-6% development ratio. When they are discussing the budget of next year, they say that they will close the year with 2.7% economic growth. Recently Tigran Sargsyan said, “The predictions are changing once every three months according to the economic zones, world economy and separate countries because due to the crisis it is very difficult to give long-term predictions.” However, he said that if the agriculture did not slump that rapidly, the economic growth would be higher. The officials are justifying this low level of development by saying that there are sectors which slumped during the crisis, but instead of that the sector of production has developed. As a result of this our economy is diversified. Unlike the prime-minister’s assurances that it is very difficult to plan long0term forecasts as it is hard to plan for more than three months in the conditions of crisis, in 2008 the giants of our economy managed to forecast and plan the economic development till 2021. According to that prediction, in 2021 the 43.9% of the country’s GDP would be provided by the sector of services, the agriculture would cover the 10.5%, the ratio of the construction sector would reduce to 16.4%, and the sector of production would reach 19.7%

The chart draws the picture of the vision of our country’s economy. The project was adopted in October 2008, when the world was speaking of the crisis. However, our officials believed the crisis would not touch us and they drew the picture of the development. However, the crisis arrived and made changes in their numbers. In 2009 instead of the 6% growth the production sector slumped by 7.8%, the sector of agriculture instead of the 4.4% development slumped by 0.1%, the sector of construction instead of the 12% growth slumped by 36.4%, and the sector of services developed by 1.3% only. But the revision of the composition of the economy did not end with these changes and it has continued during the 8 months of this year as well. The sector of production has grown more than the planned level and reached 11.5%, the sector of agriculture slumped by 18%, and the sector of construction slumped by more 2.4% compared to the crisis year. Only the growth in the sector of services is close to the planned level and makes 7.2%. As a result, the composition of the economy, especially the part concerning production, exceeded the expectations for 2021.

Thus, if in ten years the sector of production was planned to cover the 19.7% of the GDP, now it has already exceeded the 24%. The sector of construction, which had to fall down to 16.4% till 2021, is already down 14%. As for the sector of agriculture, notwithstanding the fact that every year it suffered because of weather conditions, and this year it slumped by 12%, it totally fits with this vision. It has not strayed much from the stabile development project, i.e. it is 14.3% instead of 14.8%. In a word, despite the changes, the economy is moving to the planned direction of production development. All this is happening not due to the development of separate sectors but as a result of the slump in different sectors, but the important thing is that the figures are showing the final result. The only thing we don’t understand is that why they need such projects or calculations if everything goes normally when they are not doing anything.