Has Armenia's economy 'almost recovered'? Minister expects double-digit growth by end of year

Armenian economic growth in 2021

For the second day in Armenia, an eyebrow-raising post by the Minister of Economy Vahan Kerobyan is being discussed on Facebook, after he stated that the Armenian economy has almost recovered since the start of the pandemic and published an indicator of economic activity for February compared to the same period last year: -5.3 percent.

In addition, he confirmed a forecast of double-digit economic growth in 2021. Although literally a week before that, the Central Bank reduced its forecast of economic growth in Armenia this year from 2 to 1.4 percent.

The expert community is also not particularly optimistic about positive economic indicators.

Below, all the details about the minister’s promises, figures from the statistical committee, expert commentary and people’s opinions.

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Minister promises economic growth over 10%

On the second day of discussions on his statement, Vahan Kerobyan had to explain his train of thought:

“The Central Bank forecasts 1.4%, 3.2% is foreseen in the budget. But our results for January-February 2021 are better than those of 2019. In 2020, the figures were significantly better [the lockdown due to coronavirus was announced later – in March] than in 2019.”

According to Kerobyan, if the current growth rate is maintained, then at the end of 2021, more than 10% economic growth will be recorded compared to 2020.

The minister again announced that several projects have already been launched for this, and several more programmes are planned to be launched soon.

Statistical Committee data

The Statistical Committee reports that according to preliminary data the rate of economic decline in January-February 2021 compared to the same period last year is 6.7%.

The volume of industrial production in January-February 2021 decreased by 7.9% compared to the same period in 2020.

The service sector indicators for January-February 2021 are 12.5% ​​lower than the figures for January-February 2020.

Growth in the first two months of 2021 was registered only in the construction industry – and only by 1% compared to the same period in 2020.

Comment

Economist Hrant Mikaelyan disagrees with the minister’s statement that Armenia’s economy “has almost recovered”:

“This is certainly not the case. If we compare the calendar period, then this is not on ordinary days, but on working days. And the number of working days in February 2020 and 2021 was the same.

On the other hand, a decline of -5.3 percent, given that there was a fairly strong growth in February last year, is not such a bad indicator. So a certain recovery is taking place.

Considering that there has been negative dynamics since March last year, there has been a serious recession – first due to quarantine due to coronavirus, and then due to the war and in general due to the quality of management, then this year we will have a low base. Especially, starting from March-April 2020 and in March-April 21, we will see an increase over the corresponding period last year.

At the end of 2021, growth will indeed be recorded. According to my preliminary estimates, growth could reach 4-4.5 percent.

As for the minister’s forecasts for double-digit economic growth, there are no such prerequisites. He bases his expectations again on the low base effect. And it will not be growth, but rather a restoration, and it will be incomplete. A full economic recovery will take several years. ”

Social media reactions

Most of the users of the Armenian Facebook segment reacted with irony to the minister’s forecasts.

Here are some comments:

“Bravo! This is one of the most profound and professional economic analyzes that I have read in recent years.”

“And if there were 30 days in February, we could move forward even more seriously. Very sorry…”.

“I wish you patience. I believe that growth could be even higher if shadow indicators could be brought to clean water. “

“Look at the dollar exchange rate, soon we will have no economy at all!”

“I will say a terrible thing: there is no economy in Armenia, as well as in the entire region. That is, speaking of an increase or decrease by 10 percent, we are talking about one open or closed plant for 500 people, relatively speaking, of course, but so that it is clear what this is about. First, in principle, it is necessary to build the economy, and there is a lot of work to be done here. “