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Bleak: Dram Continues To Devalue And Prices Increase

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  • Bleak: Dram Continues To Devalue And Prices Increase

    BLEAK: DRAM CONTINUES TO DEVALUE AND PRICES INCREASE

    ECONOMY | 13.01.15 | 15:51

    NAZIK ARMENAKYAN
    ArmeniaNow

    By Sara Khojoyan
    ArmeniaNow reporter

    The Armenian government has no economic tools to fight against
    the problems threatening the country's economy as a result of the
    devaluation of the dram, some experts say.

    At the end of 2014, the government stabilized the currency rate at
    450 AMD/dollar after it had reached 550/$1 in November. But the dram
    continues to devalue, as it sold at 474/$1 on January 12.

    According to economist Vilen Khachatryan, the dram devaluation
    will continue, conditioned by economic developments in the world,
    particularly because of the drop in oil prices, and as long as
    Armenia imports more than it exports this will be a big problem for
    the country.

    "Until we reach the point when our Balance of Payment is less negative,
    i.e. we start exporting more, it will be very difficult to avoid such
    phenomenon in our economy," the economist told ArmeniaNow.

    It is noteworthy that in the very beginning of the AMD devaluation
    marathon, in December, the Central Bank gave importance to the process
    especially in terms of boosting export; however, Khachatryan is sure
    that there was no increase of export volumes.

    "It would be good if it stays on the same level," the expert said. "We
    must produce in order to export; the production potential of our
    country currently is what we have. The amount of export might be the
    same, but in terms of numbers - the sum, the export, there might even
    be a decrease."

    Khachatryan's conclusions are based on the drop of international market
    price on materials exported from Armenia, such as steel and molybdenum.

    Opposition Armenian National Congress (ANC) Party representative,
    economist Vahagn Khachatryan does not see possibilities for export
    growth either.

    "It does not happen on its own. It needs time, because production
    must be developed and proper technologies bought," the economist
    told ArmeniaNow.

    "In a country like Armenia where import is three times more than the
    export, this situation means inflation," he added.

    In the previous year inflation in Armenia formed 4.6 percent,
    three percent of which was recorded in December only, the National
    Statistical Service (NSS) informed.

    In mid-December, 2014, when AMD drastically fell, prices for numerous
    consumption goods went up, and although Armenian Prime Minister Hovik
    Abrahamyan personally visited supermarkets and stabilized the prices,
    according to the citizens, prices for goods of first necessity like
    bread, butter and sugar grew by 5-15 percent.

    According to Khachatryan, the country does not possess the resources
    which could help Armenia to withstand the consequences of the
    devaluation of the currency.

    "We have no export, transfers already in November-December showed bad
    indexes, no investments are made, and there is no more opportunity to
    borrow," the economist said adding that after the 2009 crisis foreign
    debt of Armenia grew from $1.5 billion to $3.8 billion.

    According to Central Bank data, the total amount of transfers made to
    Armenia in November of 2014 formed about $142,000, while during the
    same period of 2013 it was $204,000. According to evaluation, transfers
    decreased mostly because of economic problems in Russia, because 80
    percent of transfers are made from Russia, by migrant workers.

    "There are no economic solutions for the created situation, and
    the current political system has expired itself already," Vahagn
    Khachatryan added.

    http://armenianow.com/economy/59752/armenian_economy_armenian_dram_inflation_exchange_ rate

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