ARMENIAN ECONOMY SHOWS FURTHER DECLINE IN JULY
Asbarez
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Aug 21st, 2009
YEREVAN (RFE/RL)-Despite a more optimistic economic outlook that has
been presented by Armenian government officials of late, the country’s
economy continued to decline in July amid a deepening fallout from
the global recession, showing a 18.5 percent Gross Domestic Product
contraction in the seven months of 2009.
The country’s GDP shrank by 16.3 percent in the first half of this
year, with the government warning that its full-year contraction
could hit a 20 percent rate.
Earlier this month, however, Prime Minister Tigran Sargsyan sounded
more upbeat on the prospects of the economy as he said that the
anti-crisis measures taken by the government should result in a
slowdown of the decline later this year that would ultimately have
made only 12 percent annually. The premier said the government also
expected the Armenian economy to grow by a modest 1 percent in 2010.
The current economy decline follows six years of robust growth in the
Armenian economy when it expanded at a double-digit rate largely due
to large-scale housing construction projects.
The global financial crisis resulted in a dramatic reduction of
investments and other money transfers that had serviced the booming
construction and other sectors of the economy.
The volume of construction work carried out in the country shrank
by 55.5 percent in the seven months of this year, significantly
contributing to the total GDP fall. This is by one percent worse than
the index posted for January-June.
Economist Ara Nranian, who is a member of the Armenian Revolutionary
Federation faction in parliament, says "nothing unexpected has happened
considering the contents and branch structure of the economic decline."
"Construction is one of the main causes of the decline. This again
shows that we have serious problems in terms of our economic structure
and policies. This crisis has only revealed and accentuated the scale
of problems that we’ve had," Nranian told RFE/RL.
Earlier this month, Urban Development Minister Vartan Vartanian argued
that the dramatic decline in the construction sector would ease in
the second half of this year thanks to wide-ranging measures taken
by the government.
"There is quite a bit of [construction] activity in the second
half," Vartanian told RFE/RL. "The government has taken all necessary
measures, and I am sure that quite positive results will be observed
in the second half, both in [private] housing construction and projects
financed from the state budget," said Vartanian.
The construction sector has been a focal point of government efforts to
alleviate the consequences of the crisis. Last April, the government
approved 20 billion drams ($55 million) in loan guarantees to private
developers struggling to complete their housing projects. Five
construction firms have reportedly received such guarantees since then.
The government also plans to spend just over one quarter of a $500
million anti-crisis loan provided by Russia on housing construction
in Armenia’s northern regions still reeling from the devastating
1988 earthquake.
Another $33 million portion of the loan is to be channeled into
a recently established state mortgage fund tasked with providing
relatively cheap housing loans to the population.