QUO VADIS?
Albert Khachatryan
news.am
April 20 2010
Armenia
After the Government’s economic policy resulted in an ignominious
failure, Armenian high-ranking officials have "taken heart of grace"
and are now issuing optimistic forecasts one after another. The reason
for their enthusiasm is the GDP growth registered early this year,
which to a great extent was accounted for by a major increase in
industrial output.
Indeed, industrial output showed an increase of as much as 9.4% (!)
this January-February as compared with the corresponding period last
year. The progress is really impressive, with a 7.8% decline in the
Armenian industry in 2009 considered.
The minerals industry, with its share in the total industrial output
being 19.2%, (8.3% last January-February) registered a 45.9% increase.
No doubt, that was the immediate result of the positive changes on the
world ferromolybdenum market. So we would greatly exaggerate if we put
the progress down to the economic policy implemented in the country.
The processing industry is an undisputed leader in the Armenian
industrial sector, with its share being 56.4% this January-February.
The processing industry registered a 9.2% increase in output and seems
to have overcome last year’s stagnation and be making up the leeway.
This is, however, at first blush.
In the processing industry the greatest progress was achieved by the
enterprises that are closely cooperating with the extractive industry.
Specifically, the output of hard nonmetallic minerals showed a 98%
increase (its share in the Armenian industry being 4.2%); the output
of base metals showed a 6.7% increase (16.2%), etc..
As regards the food industry, its figures leave to be desired. This
January-February as compared with last January-February, the food
output showed a 0.1% decrease, output of beverages a 2.7% decrease,
and tobacco output a decrease of as much as 12.9%.
As regards beverages, the output of vodka, the most popular hard drink
in Armenia, showed a 60.5% decrease. This fact could only be welcomed
if the consumption of the "demon drink" reduced as much. But such
significant progress can hardly be achieved in one year. So we can
be sure that Armenian citizens go on drinking and smoking — to an
extent imported drinks and baccy.
If continue, the aforementioned market trends threaten the Armenian
market with import domination and a worse situation in the import
substitution industries. Last year’s USD revaluation against the
AMD was expected to improve the situation in the industries, which,
however, did not happen.
The Armenian light industry is in a similar deplorable state. This
January-February the symbolic textiles output showed a 48.8% decrease,
and the clothing output a 21.7% decrease. So the USD revaluation did
not even stabilize the situation in this industry. So we should not
be euphoric about the industrial production index in Armenia. As we
have mentioned above, a better situation in the raw-materials industry
mainly accounts for the better index.
As regard the processing industry, of interest is the following
fact: this January- February as many metal-cutting machine tools were
produced in Armenia as last January-February – one machine tool in two
months! So what diversification of production, and related export, can
we dream of if the Armenian industry is only based on ferromolybdenum,
copper concentrate, aluminum foil and brandy?