Tweet
ARMENIA'S FINANCIAL SYSTEM ONE OF BEST DEVELOPED IN THE COMMONWEALTH
Exclusive interview of director of Eurasian Development Bank (EDB)
Yerevan office Sergey IGNATOV to ARKA Agency
ARKA: What are EDB's projections of Armenia's macroeconomic development
for 2013 bearing in mind the current global economic situation and
WB's and IMF's global GDP decline estimates for 2013-2014?
Ignatov: In 2013, amid lasting weakness in the global economy, and the
European economy in particular (45% of Armenian exports as per 2011),
Armenia's economic growth should be expected to slow down. According
to the consensus-forecast that includes the estimates of IMF, WB and
EBRD, Armenia's GDP is to stand at 4.6% in 2013. The economy will
slow down if foreign demand weakens and metal prices reduce.
Changing demand and export prices will have a direct impact on
export-oriented sectors of mining and processing industries, as
well as on export and fiscal revenues and macroeconomic stability in
Armenia. On the other hand, global economic weakness may affect also
economies of countries that are the main source of money transfers
and direct foreign investments. Hence, an additional risk exists that
domestic demand may weaken, both in terms of consumer demand spurred
by money transfers and investment demand that has remained low since
the 2009 crisis.
ARKA: What was EDB's investment portfolio in Armenia as of the end
of 2012? What investments are planned for Armenia in 2013, and which
sectors of the Armenian economy the bank has prioritized and considered
attractive for now and up to 2015?
Ignatov: EDB's investment portfolio in Armenia reached 109mln USD
by the end of 2012, including the redeemed projects. The current
portfolio is 79mln dollars that includes projects on SME financing
and microfinance in a form of target credit lines to financial
institutions.
Currently the bank is considering several projects in agriculture,
mining, transport infrastructure and other sectors.
ARKA: How do you assess the investment climate in Armenia and expected
investments in the projects currently implemented in the republic?
Ignatov: The investment climate of Armenia is one of the most
favorable among the Bank's member states. It is due to a pretty stable
macroeconomic situation, relatively high GDP growth at low inflation
rates, AMD strengthening and some other macroeconomic factors.
Armenia's financial system advances at one of the best rate in the
CIS due to the strict banking control policy conducted by the Central
Bank, a single credit register, commitment to the best world experience
and relatively small market size.
In the last rating of Doing Business, Armenia improved its positions
inching up from 50th to 32nd place (for comparison: Kazakhstan
ranked 49th, Russia-112th) as it advanced the indices in three most
important categories: protection of investors, taxation, connection
to electricity networks. Such business environment is considered to
be one of the best among the Bank's member states.
ARKA: Does EDB plan entering new segments of the Armenian economy,
for example, the agro sector?
Ignatov: EDB is considering financing several large commercial
projects in Armenia, including those in agro sector, mining, transport
infrastructure and more.
ARKA: Today Armenia is actively implementing Strategic industrial
policy targeted at export. Could you, please, assess the prospects
of Armenia in this direction?
Ignatov: Export boost and its diversification through improving
foreign competitiveness are one of the most important aspects for
economic policy. Armenia mainly exports raw materials what increases
the republic's vulnerability to external shocks. The main priority
of Armenia for the near future should remain the development of the
republic's export potential through designing export-oriented and
import-substitution mechanisms.
It is also important to note that Armenia has high export potential
in agro-industrial complex. This potential is partially realized
in food industry. As to processing industry, Armenia should move up
through the production-chain. However, the successful implementation
of this industrial policy will be possible if the authorities
are persistent and apply to a systematic approach to export
development. The authorities should foster export boost supporting
exporters, creating for them an appropriate institutional environment
(business environment, transport infrastructure, legislature, foreign
investments, etc.) as well as reducing the transport blockade,
facilitating the access to the strategic markets of Russia, EU, etc.).
ARKA: EDB is actively cooperating with some Armenian banks in SME
financing. Do you have any intentions to expand this cooperation
considering SME as an important tool for economy development?
Ignatov: Currently, EDB finances two projects -SME support project
and microlending. In 2012, new demanded products appeared which we
were happy to offer: energy efficiency support and farmers support
programs. This is a targeted financing of the banks for further
lending to real sector enterprises that resolves the issues related
to loan resources accessibility. -0-
Exclusive interview of director of Eurasian Development Bank (EDB)
Yerevan office Sergey IGNATOV to ARKA Agency
ARKA: What are EDB's projections of Armenia's macroeconomic development
for 2013 bearing in mind the current global economic situation and
WB's and IMF's global GDP decline estimates for 2013-2014?
Ignatov: In 2013, amid lasting weakness in the global economy, and the
European economy in particular (45% of Armenian exports as per 2011),
Armenia's economic growth should be expected to slow down. According
to the consensus-forecast that includes the estimates of IMF, WB and
EBRD, Armenia's GDP is to stand at 4.6% in 2013. The economy will
slow down if foreign demand weakens and metal prices reduce.
Changing demand and export prices will have a direct impact on
export-oriented sectors of mining and processing industries, as
well as on export and fiscal revenues and macroeconomic stability in
Armenia. On the other hand, global economic weakness may affect also
economies of countries that are the main source of money transfers
and direct foreign investments. Hence, an additional risk exists that
domestic demand may weaken, both in terms of consumer demand spurred
by money transfers and investment demand that has remained low since
the 2009 crisis.
ARKA: What was EDB's investment portfolio in Armenia as of the end
of 2012? What investments are planned for Armenia in 2013, and which
sectors of the Armenian economy the bank has prioritized and considered
attractive for now and up to 2015?
Ignatov: EDB's investment portfolio in Armenia reached 109mln USD
by the end of 2012, including the redeemed projects. The current
portfolio is 79mln dollars that includes projects on SME financing
and microfinance in a form of target credit lines to financial
institutions.
Currently the bank is considering several projects in agriculture,
mining, transport infrastructure and other sectors.
ARKA: How do you assess the investment climate in Armenia and expected
investments in the projects currently implemented in the republic?
Ignatov: The investment climate of Armenia is one of the most
favorable among the Bank's member states. It is due to a pretty stable
macroeconomic situation, relatively high GDP growth at low inflation
rates, AMD strengthening and some other macroeconomic factors.
Armenia's financial system advances at one of the best rate in the
CIS due to the strict banking control policy conducted by the Central
Bank, a single credit register, commitment to the best world experience
and relatively small market size.
In the last rating of Doing Business, Armenia improved its positions
inching up from 50th to 32nd place (for comparison: Kazakhstan
ranked 49th, Russia-112th) as it advanced the indices in three most
important categories: protection of investors, taxation, connection
to electricity networks. Such business environment is considered to
be one of the best among the Bank's member states.
ARKA: Does EDB plan entering new segments of the Armenian economy,
for example, the agro sector?
Ignatov: EDB is considering financing several large commercial
projects in Armenia, including those in agro sector, mining, transport
infrastructure and more.
ARKA: Today Armenia is actively implementing Strategic industrial
policy targeted at export. Could you, please, assess the prospects
of Armenia in this direction?
Ignatov: Export boost and its diversification through improving
foreign competitiveness are one of the most important aspects for
economic policy. Armenia mainly exports raw materials what increases
the republic's vulnerability to external shocks. The main priority
of Armenia for the near future should remain the development of the
republic's export potential through designing export-oriented and
import-substitution mechanisms.
It is also important to note that Armenia has high export potential
in agro-industrial complex. This potential is partially realized
in food industry. As to processing industry, Armenia should move up
through the production-chain. However, the successful implementation
of this industrial policy will be possible if the authorities
are persistent and apply to a systematic approach to export
development. The authorities should foster export boost supporting
exporters, creating for them an appropriate institutional environment
(business environment, transport infrastructure, legislature, foreign
investments, etc.) as well as reducing the transport blockade,
facilitating the access to the strategic markets of Russia, EU, etc.).
ARKA: EDB is actively cooperating with some Armenian banks in SME
financing. Do you have any intentions to expand this cooperation
considering SME as an important tool for economy development?
Ignatov: Currently, EDB finances two projects -SME support project
and microlending. In 2012, new demanded products appeared which we
were happy to offer: energy efficiency support and farmers support
programs. This is a targeted financing of the banks for further
lending to real sector enterprises that resolves the issues related
to loan resources accessibility. -0-