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EURASIA INSIGHT

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