IS THERE A LOCAL CRISIS THREAT?

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[08:30 pm] 30 October, 2008

What lessons must Armenia learn from the global economic crisis
and how can Armenia ease the impact? This and other issues were
discussed during a meeting today with a number of economists and
public and political figures at the Armenian Center for National and
International Studies.

In his intervention, Yerevan State University lecturer and leading
economist Dr. Tatoul Manasserian examined the impact which today’s
global economic crisis is having on the economy of Armenia and the
lessons being learned from this situation. According to him, this
crisis was anticipated for a long time and was completely predictable
but, because of the economic globalization, it encompassed an expanse
that was broader than expected. "And even though Armenia does not have
a stock exchange–which is the heart of economy–and is therefore
‘isolated’ from the global economy, this does not at all immune the
country from numerous setbacks." Manasserian noted. "The most essential
setback is the fact that the imports will surpass the exports four
times and this means we are not a country that affects the prices,
but rather one that abides to the price fluctuations. And this is
because we import in accordance with the prices that are set by the
global market." As for the lessons to be learned from this crisis,
Manasserian pointed that Armenia’s economy now must grow with an
inartificial impulse; the financial sector needs to be linked with
the real sector; individual steps have to be taken which will promote
economic growth; the Armenian currency, the dram, should gain natural
value; the economic and political elite must be detached; dependency
on few allied countries ought to be eliminated; the investment field
needs to be regulated; and imports have to be reduced on the account
of increasing competition.

The next speaker, Slavonic University lecturer and "Political Economy"
Research Institute director Andranik Tevanian, spoke about the foreign
and domestic challenges facing Armenia’s economy. "The current
crisis, which primarily was caused by the ‘cheap-money’ policy of
the United States, was the first large global economic emergency
of the post-industrial societies with virtual economies. And this
calamity had its unavoidable bearing on Armenia’s economy as well,"
Tevanian maintained. "The first collapse in Armenia probably was
recorded in the real estate market, which was greatly dependent on
the mortgage credits. The second was the reduction in the private
monetary transfers, mainly from Russia and elsewhere, which hurts
600-700 thousand Armenian residents. And thirdly, the consumer market
will face an immediate predicament." In Tevanian’s view, Armenia also
could have gained dividends from this crisis because its economy was
not integrated and, if the prices of consumer goods fell, Armenia
could have imported cheap products. "But, sadly, we can hardly make
use of this situation. The problem is inside the country and the
economic structure in different domains is either a monopoly, or an
anti-competition system is in effect, plus the ruling administration
and the business circle are intertwined," Tevanian stated.

In his turn, Real Estate Information Center director, Associate
Professor Erik Mesropian reflected on the ongoing global economic
turmoil’s immediate bearing on Armenia’s realty market. He underscored
the importance of the changes taking place in this domain since
it constitutes approximately one-third of the country’s national
income. "The mortgage crisis reminded us of the problems connected
with the realty market, which provides a considerable portion of
Armenia’s GDP and is also the main source of employment," Mesropian
argued. "However, Armenia is the supplier of the great majority of
construction materials and the sharp increase–which is not dependent
on the global processes, at all–in their prices deals a heavy blow
to this sector. And therefore not only the consequences of the world
economic crisis, but also those of the ‘Armenian crisis’ have affected
this domain adversely," Mesropian maintained. According to him, as
a result of Armenia’s current political situation created after the
presidential elections and because of the country’s new tax policy, the
real estate market of Armenia now has registered a reduction in demand.

The roundtable discussants also included analyst Movses Aristakesian
of the "Center for Economic Rights" NGO; director Gagik Makarian of
the Union of Manufacturers and Businessmen of Armenia; chairman Edward
Antinian of the "Democracy, Prosperity, Security" NGO; Armine Udumian
from the State Commission for the Protection of Economic Competition;
journalist and economist Hrair Manukian; and several others.