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  • Western donors laud economic growth in Armenia

    EurasiaNet, NY
    July 29 2005

    WESTERN DONORS LAUD ECONOMIC GROWTH IN ARMENIA
    Emil Danielyan 7/29/05


    Armenia's continuing robust economic growth is winning accolades from
    Western donors. A consensus is building among economic experts that
    the tiny South Caucasus state is finally emerging from its
    post-Soviet doldrums.

    Officials from the International Monetary Fund (IMF) and other donor
    organizations now believe that decade-long growth in Armenia has
    produced a sizable reduction in poverty. "Armenia is on a promising
    path toward sustained high growth and the alleviation of poverty,"
    Agustin Carstens, the IMF's deputy managing director, said at the end
    of a mid-July visit to Yerevan. In May, the IMF expressed its approva
    of Armenia's economic directionl by offering a three-year,
    $34-million loan agreement.

    According to official statistics, Armenia's Gross Domestic Product
    rose by 10.2 percent in the first half of this year. The GDP growth
    has averaged 11 percent during the previous four years. Carstens
    strongly endorsed the Armenian government's economic strategy. "The
    IMF stands ready to continue to assist Armenia with policy and
    technical advice, as well as financial support in implementing its
    reform agenda," he said, adding that the Armenian economy is
    expanding so fast that it now runs the risk of "overheating."

    Brian Kearney, who runs a US government-funded project to reform
    Armenia's social security system, said economic growth has had a
    visible impact on living standards, adding that it has also lifted
    the public mood. "There is a new buoyancy and a new confidence that
    wasn't here five years ago. It might seem a small thing but, for me,
    just the change in people's demeanor and approach to life is
    remarkable."

    "Five years ago it was very much hanging on," Kearney added. "Now I
    see people striding forward."

    Household income surveys regularly conducted by the Armenian
    government show that the proportion of Armenians living below the
    official poverty line shrunk from 55 percent in 1999 to just below 43
    percent in 2003. The poverty rate would stand at 32 percent if it
    were calculated using World Bank methodology that uses consumption
    expenditures, as opposed to income. Each income survey is based on
    data collected from about 5,000 households. Officials say the results
    of similar research conducted last year and to be released this fall
    will show a further drop in poverty.

    "There are very few countries that have achieved such important
    progress in such a short period of time," the IMF's Carstens said.

    However, some economic analysts view official figures with
    skepticism. For instance, many analysts believe the official poverty
    line of about 13,000 drams ($30) per month is set too low given the
    rising cost of living. The National Statistical Service of Armenia
    (NSSA) estimated in a 2003 report that the average Armenian family
    spent two thirds of its income on food -- a telling indicator of
    persisting hardship. "The consumption of high-priced food products
    such as meat products, milk products, fruits and eggs is very low,"
    the report said. The government agency also asserted that many
    Armenians still cannot afford adequate healthcare as "only one in
    three persons with health problems applied to a doctor for medical
    care."

    There is also a mounting income gap dividing the rich and poor, as
    well as Yerevan residents from those living elsewhere. Many rural
    areas have hardly seen any development since the economic collapse of
    1992-1993, when Armenia's GDP shrunk by half due to the outbreak of
    wars in Nagorno-Karabakh and elsewhere in the South Caucasus. The
    social polarization reflects a highly uneven distribution of benefits
    of economic growth, some experts contend. The gap is widened further
    by widespread tax evasion among the wealthiest citizens. The Armenian
    government's tax revenues are on track to rise by about 30 percent
    this year, but they will still make up a very modest 16 percent of
    the GDP.

    More importantly, the rate of job creation has lagged behind the
    economic expansion, failing to alleviate the country's number one
    social problem -- unemployment. The official unemployment rate,
    measured by the Armenian Ministry of Labor, stands at just over 10
    percent. But the real figure is probably much higher, many economists
    estimate. The NSSA, for example, puts the unemployment rate at a
    staggering 30 percent, citing a 2003 labor force survey.

    Nevertheless, anecdotal evidence of increased prosperity is strong.
    This includes skyrocketing real estate prices, a growing number of
    cars, shops and other small businesses as well as a construction boom
    in central Yerevan. Economists still cannot explain what exactly has
    driven economic growth over the past decade. First-half growth in
    2005 appears to be connected with a 43 percent surge in the
    construction sector. Another important factor is cash remittances
    from hundreds of thousands of Armenians working abroad. The Armenian
    Central Bank says remittances jumped by 50 percent to $750 million in
    2004.

    In addition, merchants have adapted to the continuing economic
    blockades by Azerbaijan and Turkey and the resulting high
    transportation costs. According to official statistics, the tiny
    landlocked country has doubled its GDP and tripled exports since the
    late 1990s. "In five years time people will reflect well when they
    look back at what has been done over the past five years," Kearney
    said.


    Editor's Note: Emil Danielyan is a Yerevan-based journalist and
    political analyst.

    From: Emil Lazarian | Ararat NewsPress
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