THE SITUATION WITH ECONOMIC SECURITY

Editorial

Yerkir/arm
August 26, 2005

The situation with the Armenian economy in the past decade shows that
the majority of the indicators characterizing the country’s economic
security are below the acceptable minimum threshold.

The decrease of the country’s productive potential causes special
concern. Currently, the annual capital investments constitute 14-15%
of the country GDP while according to expert estimates the lowest
acceptable share of GDP used for capital investments is 25%.

A serious problem in terms of economic security is the lack of
innovations in the economy – the share of high tech production in the
economy is lower than 15% of the GDP. In Armenia, high tech production
constitutes about 2-3% of the overall economy. The situation remains
extremely tense from the point of view of economic security in the
sphere of employment and distribution of incomes.

According to international standards, the economic security of
a country is considered to be threatened if the unemployment rate
reaches 6-7%. In Armenia even the official sources indicate that the
unemployment rate is 9% while the estimates of independent experts
indicate that the real unemployment (including hidden employment)
reaches 32-34%.

The monetary sector is also facing some threats in terms of economic
security. The country’s economy is highly dollarized. The national
currency becomes secondary to the almighty dollar.

The economic security is considered to be threatened when the share of
monetization of the economy is lower than 50% of the GDP. In Armenia,
this indicator is 15-17%. The economic and consequently military and
political threats to the country’s security have become so serious
that they have turned into challenges for the very existence of
the statehood.

The situation is critical in terms of per capita income, growth
of productivity, technological modernization and several other
indicators. Immediate and operational measures are necessary to improve
the situation. Along with radical political and legal reforms in the
country, it is necessary to review the existing economic policies
that stipulate that the main priority for transition economies is
macroeconomic stability.

This approach enforced by international financial organizations will
lead Armenia to final deterioration of productivity, destruction of the
strategically important scientific sector and loss of any perspectives
for development. Such developments can by no means contribute to the
emergence of a dynamic and sustainable economy in the country.

From: Emil Lazarian | Ararat NewsPress