The critical drop in the world oil prices seems to seriously affecting the economy of Armenia that has no oil. However, given the great dependence of Armenia’s economy from Russia’s economy which in its turn is heavily dependent on oil prices, the drop in oil prices, willy-nilly, has a negative impact on our country. The price of oil per barrel at the international stock is already close to 32 dollars.
In an interview with “Aravot”, economist Mesrop Arakelyan noted that the drop in oil prices does not directly affect Armenia’s economy, however, since the end of 2014, the drop in world oil prices had its impact on the Russian economy, in particular, on the depreciation of the Russian ruble, as a result, it reflected on Armenia’s economy. The devaluation of the Russian ruble, of course, had an impact on the reduction in the volume of remittances to Armenia from that country. “This in turn led to a chain of problems on our entire economy. This tendency was observed during the whole year of 2015. In early 2016, the oil prices once again recorded a sharp decline, in the future, I think that Russia’s deepening economic problems will also have an impact on Armenia,” said the economist.
Arakelyan notes that the decline in remittances is clearly a major factor in Armenia’s economy, the income of the majority of our population is on the account of the remittances, and in the result of such reduction, an increase in the poverty level and a decrease in consumption happens. In Arakelyan’s words, “In 2015, we had a serious drop in trade and other sectors of the economy. We have serious economic relations with Russia, this country is our main partner. In 2015, we had a drop in foreign trade with Russia as a result in a drop of the ruble. Our exporters were not exporting goods to Russia. This trend is continual.”
This year, too, we cannot expect anything good. The economist notes that now, one US dollar is 75 rubles and the devaluation of the Russian ruble will be subsequent to the drop in oil prices. In response to our question of what it is caused by that our local currency is not devaluated as the currencies of other countries, the economists said that after the devaluation of our currency in the end of 2014, the stability if our local currency is ensured, “The export in our country has dropped, parallel to this, the import has dropped in greater rates. True, this is not so positive from the economic point of view, the overall commodity turnover is reduced, but in terms of exchange rates, it had a positive impact. As the outflow of foreign currency has dropped as a result of a decrease in imports, and there is no rise in the exchange rate in the past one year.”
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Arakelyan thinks that given the passive paces of the economy, there will be no major changes in the foreign commodity turnover. Bloomberg forecast for Armenia this year is 2.5% economic growth, the World Bank – 2.2% and Russia – 0.5% decline. To the question that given to the fact that Armenia’s economy depends on Russia’s economy, so what positing thing can Armenia obtain in the event of such paces of growth projected for us, the economist said that it will provide nothing essential. “Given Russia’s growing problems in the economy, it is possible that we would not register a growth. The weight of growth in agriculture in our economy is great and in the event of unpredictability in the sphere of agriculture, there will be either up or down.”
To our question that one of the prescriptions to save our economy is the diversification of the export, and in the event of the lack of competitiveness for the majority of our products, so how it is possible to provide diversification for export, the economist said, “Yes, the fact of not being competitive of our products does not allow to actively diversifying the exports, at the same time, as we are a member of the EaEU, it is natural that our main partners are going to be the EaEU countries, which will gradually make more difficult to find other markets. I think we need to boost our exports to those markets, which unfortunately coincided with the problems going on in Russia. As a result, the accession to the EaEU has not yet yielded any positive thing for Armenia.” The government is making some reforms, yesterday, the government debated the promotion of export of local products, steps are regularly taken but we do not see the outcome.
To our observation of whether the businesses are not ready or there are other problems, Arakelyan said that the main problems are associated with the expectation of negative tendency in the economy, both by the businesses and consumers. “In this short-term of this year, there is no tendency that the situation will be improved dramatically. In this sense, all of them are postponing their economic activities, they do not want to make new investments. Therefore, it is necessary to do some revolutionary programs, it is impossible to give solutions with small farms and productions. We should not expect that things will change in short-term solutions. An overall economic structural changes should be made, the dependence on remittances should be reduced, for which a significant part of the income of the population should be created in Armenia, this is impossible in short-term.”
Back to the government reforms, the economists said, in spite of these reforms, the problem is associated with the confidence, “Businesses do not trust our today’s economic system. No positive result is expected with a few minor changes, people want to see a long-term confidence environment to make investments, they want to see an environment that will enable to bring in foreign long-term investments. Such an environment, for example, exists in Georgia, there is a high confidence environment in the economy there, which is missing in Armenia. In our country, the general economic environment is at the level of distrust.”
Nelly BABAYAN
