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ARMENIA GOVT. COMES TO AID OF CRISIS-HIT CONSTRUCTION SECTOR
www.asbarez.com/index.html?showarticle=413 03_4/10/2009_1
Thursday, April 9, 2009
YEREVAN (RFE/RL)--In what could be a major boost to one of the largest
sectors of Armenia's economy, the government approved on Thursday at
least 20 billion drams ($54 million) in credit guarantees for local
construction firms hit hard by the economic crisis.
"The state guarantees will enable builders to attract credit resources
from commercial banks," Prime Minister Tigran Sargsyan said during a
weekly session of his cabinet. He said the approved sum is earmarked
for the "first phase" of the financial support, suggesting that the
government is ready to increase it later on.
The Armenian construction industry has expanded massively in recent
years, generating about one quarter of the country's $12 billion
Gross Domestic Product (GDP) last year. The building boom, fuelled
by strong demand in expensive housing and office space, has been a
major driving force behind Armenia's double-digit economic growth.
The sector stopped growing and began contracting with the onset of the
global economic downturn last fall. The decline is particularly visible
in Yerevan where work at many of the dozens of construction sites
has ground to a halt in recent months. The risk-averse Armenian banks
are reportedly reluctant to make new loans to construction companies.
"Today the liquidity rate of commercial banks is extremely high,"
Sargsyan told ministers. "They have accumulated resources, and the
only factor that restrains them from increasing the volume of lending
is risk assessment." The credit guarantees offered by the government
will make them finance construction projects far more readily, he said.
According to the prime minister, construction firms needing such
guarantees will have to apply to a special task force coordinating
the government's anti-crisis measures and to offer real property
as collateral. "Presumably, preference will be given to those
incomplete construction projects whose degree of completion is at
least 75 percent," he said. "Obviously, the purpose of that is to
put completed apartments up for sale as soon as possible."
Whether those apartments will quickly find buyers in the existing
economic conditions remains to be seen. The Central Bank of Armenia
(CBA) announced on Thursday that it will spend 5 billion drams to set
up next month a new mortgage lending company that will make housing
loans cheaper and more accessible for Armenians. The CBA said the
company's authorized capital will grow sharply by the end of this
year as a result of similar investments expected from the Armenian
private sector and foreign investors.
One owner of a Yerevan-based construction firm, who asked not to be
identified, cautiously welcomed the announcement. "It will probably
have an indirect positive impact," he told RFE/RL.
The businessman also said that his company is continuing its operations
despite the crisis. "We hope to be able to sell apartments," he said.
"We don't worry about sales," said another builder, who also spoke
on condition of anonymity. "It's just that the economic situation is
pushing apartment prices down."
"Targeted" assistance to struggling Armenian businesses is one of the
elements of the government's strategy of reducing the fallout from the
global recession. Sargsyan announced recently that the anti-crisis
task force has already allocated 25 billion drams ($68 million) in
financial aid to 18 firms. Most of that aid is understood to have
taken the form of equity investment.
The government also disbursed in February a $10 million loan to
Armenia's largest metallurgical enterprise mostly owned by a German
group. The Zangezur Copper-Molybdenum Plant is due to use the money
for modernizing its facilities and boosting output in the coming years.
www.asbarez.com/index.html?showarticle=413 03_4/10/2009_1
Thursday, April 9, 2009
YEREVAN (RFE/RL)--In what could be a major boost to one of the largest
sectors of Armenia's economy, the government approved on Thursday at
least 20 billion drams ($54 million) in credit guarantees for local
construction firms hit hard by the economic crisis.
"The state guarantees will enable builders to attract credit resources
from commercial banks," Prime Minister Tigran Sargsyan said during a
weekly session of his cabinet. He said the approved sum is earmarked
for the "first phase" of the financial support, suggesting that the
government is ready to increase it later on.
The Armenian construction industry has expanded massively in recent
years, generating about one quarter of the country's $12 billion
Gross Domestic Product (GDP) last year. The building boom, fuelled
by strong demand in expensive housing and office space, has been a
major driving force behind Armenia's double-digit economic growth.
The sector stopped growing and began contracting with the onset of the
global economic downturn last fall. The decline is particularly visible
in Yerevan where work at many of the dozens of construction sites
has ground to a halt in recent months. The risk-averse Armenian banks
are reportedly reluctant to make new loans to construction companies.
"Today the liquidity rate of commercial banks is extremely high,"
Sargsyan told ministers. "They have accumulated resources, and the
only factor that restrains them from increasing the volume of lending
is risk assessment." The credit guarantees offered by the government
will make them finance construction projects far more readily, he said.
According to the prime minister, construction firms needing such
guarantees will have to apply to a special task force coordinating
the government's anti-crisis measures and to offer real property
as collateral. "Presumably, preference will be given to those
incomplete construction projects whose degree of completion is at
least 75 percent," he said. "Obviously, the purpose of that is to
put completed apartments up for sale as soon as possible."
Whether those apartments will quickly find buyers in the existing
economic conditions remains to be seen. The Central Bank of Armenia
(CBA) announced on Thursday that it will spend 5 billion drams to set
up next month a new mortgage lending company that will make housing
loans cheaper and more accessible for Armenians. The CBA said the
company's authorized capital will grow sharply by the end of this
year as a result of similar investments expected from the Armenian
private sector and foreign investors.
One owner of a Yerevan-based construction firm, who asked not to be
identified, cautiously welcomed the announcement. "It will probably
have an indirect positive impact," he told RFE/RL.
The businessman also said that his company is continuing its operations
despite the crisis. "We hope to be able to sell apartments," he said.
"We don't worry about sales," said another builder, who also spoke
on condition of anonymity. "It's just that the economic situation is
pushing apartment prices down."
"Targeted" assistance to struggling Armenian businesses is one of the
elements of the government's strategy of reducing the fallout from the
global recession. Sargsyan announced recently that the anti-crisis
task force has already allocated 25 billion drams ($68 million) in
financial aid to 18 firms. Most of that aid is understood to have
taken the form of equity investment.
The government also disbursed in February a $10 million loan to
Armenia's largest metallurgical enterprise mostly owned by a German
group. The Zangezur Copper-Molybdenum Plant is due to use the money
for modernizing its facilities and boosting output in the coming years.