ARMENIA: WHICH WAY IS UP FOR THE ARMENIAN ECONOMY?
Marianna Grigoryan

Eurasia Insight
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9/22/09

The Armenian government is predicting the imminent return of sunny days
for the country’s economy. But talk to Armenians outside the capital
of Yerevan and their forecast calls for extended periods of gloom.

The village of Sarchapet, a hamlet of 3,000 people some 170 kilometers
north of Yerevan, is perhaps representative of the plight outside the
capital. The lack of work abroad has made for an "extremely severe"
situation in Sarchapet, according to Artavazd Baroian, the deputy
head of the village’s administration.

"Except for the old men, 90 percent of the men in our village support
their families by working abroad," Baroian elaborated. "People cannot
send their children to school, they have no money to buy clothing and
shoes for them. Village people cannot find work abroad, nor can they
come back home to their families."

Prime Minister Tigran Sargsyan recently expressed optimism that
the economy, which has taken a beating during the global financial
crisis, would begin to rebound by the end of 2009. [For background
see the Eurasia Insight archive] Sarchapet residents, however, have
little reason to believe that a turnaround is at hand. "I don’t know
what kind of anti-crisis program they [government officials] are
implementing in Yerevan, but villagers’ bank accounts are absolutely
empty," Baroian said.

Villagers now rely on barter to obtain necessary goods, he said. For
example, they exchange potatoes, cabbages, and dairy products for soap,
flour and sugar in shops.

Even in Yerevan, a return to a pre-crisis standard of living
appears a long way off. Where a construction boom once provided
an abundance of jobs, some residents are now scrambling to unload
properties. Others are being forced to hunt for high-interest loans
to save their residences. Grocery stores, meanwhile, have slashed
supplies of higher priced items, such as meat. Some businesses are
shuttered. Where fancy new office and apartment towers were being
built a few years ago, all is now still. The construction industry
has contracted by 55.5 percent, according to the National Statistical
Service. Defaults on bank loans are up by five to six times, added
Emil Soghomonian, the president of the Banks of Armenia Association.

The government insists that an anti-crisis program implemented
in early 2009 is working well. The program focuses on support for
investment, exports and small-and-medium businesses, but recently has
concentrated its efforts on providing government financial guarantees
to construction companies.

While Prime Minister Sargsyan believes the country will soon enter a
"recovery cycle," he nevertheless has stated that Armenia probably will
"close this year with a 12-percent" decline in Gross Domestic Product.

Data published by the National Statistical Service, however, is
painting a much more distressing picture of the economy’s performance,
indicating that the downturn is only worsening. That is, in turn,
prompting some analysts to forecast a 20 percent economic decline
this year.

"I believe the recessionary trends still persist, and I would be happy
if they were halted by mid-2010," said economist Tatul Manaserian,
an advisor to National Assembly Chairperson Hovik Abrahamian. "If
next year we see even zero growth, I would call it very optimistic."

Labor migration, which has long buoyed the Armenian economy, continues
to languish. The number of people going abroad in search of work has
fallen to some 30,000 to 35,000, according to estimates provided by
the Ministry of Territorial Administration’s Migration Agency. Roughly
150,000 Armenians in Russia alone lost their jobs this year, the
agency estimates.

The Central Bank’s most recently published figures show that private
cash remittances decreased by 33.2 percent in June, compared with
the same month last year. The June figures actually marked a slight
improvement over May, which saw a 36.5 percent decline in remittances.

As economic indicators have fallen, crime statistics have
soared. According to official figures, the country recorded a
71-percent increase in overall crime during the first half of this
year. Violent crime, including murder and assault, rose by 48.3
percent; fraud and household robbery have also experienced a drastic
increase.

"We knew that an increase in crimes would be recorded parallel to the
economic crisis," said police spokesperson Sayat Shirinian. "This is
a crisis."

The economic crisis could soon start having political
repercussions. Sociologist Aharon Adibekian, director of the polling
center Sociometer, suggested that lingering hardship was fueling
anti-government sentiment.

Dwindling domestic support could end up severely restricting the
government’s room for maneuver as it pursues a rapprochement with
Yerevan’s long-time foe, Turkey. "If your economy is registering such
rates of decline, your foreign policy cannot be taken seriously,"
explained independent political analyst Yervand Bozoian. [For
background see the Eurasia Insight archive]

Editor’s Note:Marianna Grigoryan is a freelance reporter based
in Yerevan.