ArmeniaNow

February 17, 2012

Head of World Bank (WB) Yerevan office Jean-Michel Happi stated on Friday, that according to their predictions in 2012 the economic growth of Armenia will be 4.2 percent. This is progress as compared to last year’s three percent growth; nevertheless, experts forecast serious challenges of Armenia’s “economic collapse and default”. 

Last year, Happi predicted almost a 5- percent economic growth for Armenia in 2012, however now he notes that “In 2012, the world economy will slow down, which cannot but have its negative influence upon the economies of developing countries.” 

Early this week Policy Forum Armenia (PFA) announced the publication of a Special Report on “Armenia: Averting an Economic Catastrophe” which is about Armenia’s economic problems. The report presents all the economic-political challenges that Armenia faces now. 

“Unless drastic changes in the economic policy direction and political-economy landscape are carried out, within the next three years, Armenia will be forced to undergo a large and painful devaluation of its currency, the dram, and/or an external sovereign debt restructuring or default,” the report reads.

PFA experts warn that since the collapse in 2009 the rapid rise in state debt of Armenia makes 40 percent of Armenia’s gross domestic product (GDP), which “has approached the limit of debt default for developing countries”. Meanwhile, “the policy of factual fixed exchange rate adopted by the Central Bank resulted in loss of three-quarters of the external reserves.”

The report says that the extremely poor state of the economy is connected with “inner political will landscape and not with lack in resources or unfavorable geographical problems.” 

“The elements of the same crony capitalist practices—where a select few have used their disproportionate access to power and influence over economic decision-making for their personal gain—have been reinforced, at the expense of growth, public health, education, and national security. This is not only immoral but in many ways also illegal and needs to change. Armenia’s window of opportunity to build a viable economy and address its severe social and demographic problems is closing rapidly,” the authors of the report warn.