Armenian gov’t says ‘economic revolution’ picking up steam – experts say excitement premature
Economic growth in Armenia this year is expected to be at least 7%, Prime Minister Nikol Pashinyan said yesterday on October 28.
The leader of the Velvet Revolution believes this indicates that the previously announced economic revolution is gaining momentum.
The prime minister spoke about launching an ‘economic revolution’ almost immediately after the change of power in the spring of 2018, realizing that people took to the streets and made a revolution, first of all, with the hope of improving the standard of living.
However, experts are not so optimistic and suggest that next year it will be more difficult to ensure such high growth rates as are being observed now. All the details below:
What specifically points to an economic revolution?
Members of the government submitted a draft state budget for 2020.
According to the document, next year the revenue of the state budget of Armenia will amount to 1.602 trillion drams (approximately 3.360 billion dollars), which will exceed the indicators of 2018 by 27.4%. This will allow the government to increase funding in several areas.
“Costs will mainly be aimed at developing human potential. In particular, healthcare financing will increase by 33% compared to 2018, education, science, culture and sports – by 41%, labor and social issues – by 21%.
From January 1, 2020, amendments to the Tax Code will enter into force. According to rough estimates, as a result of these changes, the salary of about 200,000 people will increase,” the prime minister said.
In 2020, it is also planned to increase pensions by 10 percent.
Pashinyan also cited data that suggests that the share of the manufacturing industry in the total share of the economy is growing.
“In January-May 2018, the share of the processing industry amounted to 62.8%, and for the same months of 2019 – already 64.6%. The share of mining and raw materials decreased from 27.6% to 25%. ”
Cabinet also suggests GDP growth for the coming years. In 2020-2022, the government set itself the task of ensuring a 7%, 8% and 9% GDP growth, respectively.
In 2020, military spending will increase significantly
Next year, already according to tradition, spending on the defense industry will increase substantially. Spending on the defense industry will increase by 25.3% compared to 2018. In 2019, defense spending compared to the previous one also increased by a quarter, and in 2018 – by 17% compared with 2017.
Earlier, the press secretary of the Ministry of Defense of Armenia Artsrun Hovhannisyan stated that they are going to direct part of the funding to purchase new types of weapons:
“We have [ed. a purchasing agreement] – both offensive and defensive weapons, which we should receive at the end of 2019, at the beginning of 2020.”
What do the experts say?
There are positive changes in the Armenian economy, but it is too early to talk about the economic revolution, economist Hrant Mikaelyan believes:
“Armenia is in good shape in terms of macroeconomics. The growth rate is good, the economy is healthy. But while we can talk about quantitative growth, about quantitative changes. We cannot talk about qualitative changes yet.”
Mikaelyan believes that in the coming years it will be more difficult to ensure the anticipated GDP growth rates:
“International financial organizations and financial and economic structures of Armenia predict economic growth in the region of 4.5-5%. The government announces almost twice as much. But these are just expectations. I think that next year it will be more difficult to ensure such a high growth rate.”