Armenian President Hails Economic Growth

Armenia has adopted a new budget reflecting good economic growth figures - but what is the real state of the economy?

Armenian President Hails Economic Growth

Armenia has adopted a new budget reflecting good economic growth figures - but what is the real state of the economy?

President Robert Kocharian, who is standing for re-election next month, has hailed the budget the Armenian parliament passed just before New Year as a sign of the country's strong economic recovery after years of decline.

"This is the first year in the history of Armenia when the state budget was fulfilled by 100 per cent both in revenue and expenditure," Kocharian said. He declared that economic growth last year had been 12.5 per cent, and that exports and industrial production had expanded by 50 and 16 per cent, respectively.

But the real economic picture in Armenia is more complex, as a large part of the population still lives in poverty and the state still has big foreign debts.

Armenia's parliament approved the budget without the conflicts and stormy debates that had characterised previous votes on the country's finances. One reason for this was perhaps that it sanctioned a sharp rise in the salaries of government officials and parliamentary deputy, who will now receive 700 US dollars a month.

The good economic figures have given a boost to President Kocharian and his prime minister, Andranik Markarian.

Gagik Minasian, chairman of the parliament's commission on financial and budget issues, praised the government's performance, saying, "For two years now Armenia has experienced stable economic growth and the government has succeeded not only in avoiding any new debts, but in substantially writing off old ones - and it managed to do this without using World Bank money."

Gohar Gyulumian, an analyst with the World Bank, endorsed these positive impressions, "In 2002, economic growth was no less than 12 per cent and exceeded 10 per cent for the first time since independence."

Gyulumian said the improvement had stabilised the level of Armenia's foreign debt and the currency. But she said new macroeconomic policies were needed to ensure the growth rate continued.

The relative political stability of the last couple of years has brought in new foreign investment and boosted employment. And although analysts anticipate that growth figures for this year will not be so impressive, they say the general trend is set to continue.

The government forecasts that this year both income and expenditure will go up by 30 per cent: it estimates it will receive revenues of 286 billion drams (around 500 million dollars) and will spend around 334 billion drams.

However, the 47 million dollar deficit is likely to be covered by World Bank loans that will further increase Armenia's large foreign debt, estimated by some to be more than one billion dollars.

And other statistics also paint a much more troubling picture.

According to former finance minister Eduard Sandoyan, about 90 per cent of Armenian factories work in the shadow economy and the annual turnover in that sector exceeds one billion dollars - much more than the official budget.

Moreover, even when more state money is being spent on the neediest members of the population, it is likely that around half of Armenians will be living on or below the poverty line, earning less than one dollar a day. The average salary for Armenians is 45 dollars a month and many have to get by on much less than that.

"From the beginning of this year my pension will grow by 20 drams for every year I have worked, so, to look at things realistically, today I am getting around eight dollars a month and after the raise my pension will be 11 or 12 dollars," said Manushak Vardanian, 69, a widow who will barely receive enough to buy food, even on her new pension.

"If not for my grandson, who works in Moscow and sends me 100 dollars a month, I would have to beg."

This underlines another important factor in the Armenian economy. Banking experts estimate that last year Armenians received at least 500 million dollars a year in remittances from relatives working abroad.

For older people who do not receive those remittances, there are only two possible routes: begging or street trading.

"Street trading no longer brings in any real income," said Varuzhan Karapetian, 57. "I earn practically nothing - it's hard to make enough to buy bread. But since I can't find a proper job, it's better to trade on the street - at least I can just about feed myself and I won't sit idle at home."

Government employees also have little reason to celebrate. Health service workers don't receive their salaries for months on end and, despite many pay rises, teachers earn less than 40 US dollars a month.

"I don't think that the new budget will bring any change for the good," said Svetlana Shagoyan, a teacher. "Even if our salary is raised twofold or threefold, it won't change anything substantially - it's a pathetically small amount at the moment."

Some Armenians do see signs of progress, however, in the emergence of a new small middle class, which earns a decent wage.

"I believe it is the only serious economic achievement in the last ten years," said Hovanes Tumanian, a relatively well-off computer programmer. "There is now a chance in this country to work and support your family more or less decently."

Peter Magdashian is a freelance journalist in Yerevan and frequent IWPR contributor

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