Armenia Keeps Up Double-Digit Growth

Monday 21, January 2008
Armenialiberty.org, Armenia

By Emil Danielyan

Armenia’s economy grew at a double-digit rate in 2007 for the sixth consecutive year on the back of its booming construction and services sectors, according to government data made public on Monday.

Macroeconomic figures released by the National Statistical Service (NSS) show Gross Domestic Product increasing by 13.8 percent to 3.14 trillion drams ($10.2 billion). The resulting inflationary pressures on the economy pushed up consumer prices by an average of 6.6 percent, well above a 4 percent target set by the government and the Central Bank.

As was the case in the previous few years, robust growth was primarily driven by burgeoning construction and services. The two sectors expanded by approximately 20 percent and together accounted for over 38 percent of GDP.

Industry, which generated another 23 percent of GDP, remained the most sluggish sector of the Armenian economy. Its aggregate output was up by only 2.6 percent not least because of a further sharp decline in the country’s diamond-cutting industry, the official statistics show.

The NSS also reported more than 20 percent gains in household incomes and the average wage which now stands at about 77,000 drams ($250) per month. This will be held up by the government as a further indication of rising living standards and declining poverty. The government says the proportion of Armenian living below the poverty line has fallen from about 50 percent to below 27 percent since the start of double-digit growth in 2002.

Opposition politicians and other government critics question the credibility of these figures, saying that the official poverty line is set too low and does not take into account the increased cost of life in Armenia. They also say economic growth is slower than is claimed by the authorities.

The past year also saw Armenia’s trade deficit reach a new high of just over $2 billion as a result of an almost 50 percent jump in imports. Armenian exports rose at a far more modest rate of 23.7 percent to $1.22 billion. Large-scale remittances from Armenians working abroad remain the main source of financing the huge imbalance.

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2008 Index of Economic Freedom

www.heritage.org

Rank: 28
Regional Rank: 15 of 41

Armenia's economy is 70.3 percent free, according to our 2008 assessment, which makes it the world's 28th freest economy. Its overall score is 1 percentage point higher than last year, reflecting some improvements in the investment regulations but an erosion of labor freedom. Armenia is ranked 15th freest among the 41 countries in the European region, and its score puts it above Europe's average—an impressive feat for an impoverished landlocked country.
Armenia rates significantly higher than the average country in eight of the 10 freedoms. Low tax rates, low government expenditure, and low revenue from state-owned businesses contribute to impressive fiscal and government freedom rankings. Inflation is low, and the banking sector is both wholly private and well regulated. Commercial regulations are flexible and relatively simple. Armenia's great strength is its investment climate, with few restrictions on foreign investment.

Armenia could still make some improvement in property rights and freedom from corruption. The judiciary is fairly weak and subject to political interference.

[...]

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YEREVAN REPORTS DOUBLE-DIGIT GDP FOR 2007

Tuesday, January 15, 2008
Eurasia Daily Monitor, DC
By Emil Danielyan

Armenia’s economy appears to have expanded at a double-digit rate for the sixth consecutive year in 2007 despite the unresolved conflict over Karabakh and the resulting high cost of the country’s transport communication with the outside world. Official statistics show its gross domestic product increasing by 13.6% to about $9 billion in the first eleven months of last year.

Economic growth continued to be primarily driven by the booming construction and services sectors, where output was up by approximately 20% from the same period in 2006. Other sectors such as agriculture and energy also posted major gains. The Armenian economy has also been greatly helped by rising large-scale remittances from Armenians working abroad. The money they send to their relatives not only boosts consumption but also allows Armenia to finance its huge trade deficit. The deficit jumped by as much as 70% to a new record high of $1.8 billion in January-November 2007, due to a surge in imports.

While admitting the uneven distribution of the benefits of the double-digit growth, the Armenian government maintains that widespread poverty in the country has decreased significantly in recent years. According to government data, the proportion of Armenians living below the official poverty line dropped from 50% in 2001 to 27% in 2006. The government has pledged to help reduce the poverty rate to 12% by 2012. Its critics question these figures, saying that the poverty line is set too low and does not take account of in the increased cost of living in Armenia.

However, Western lending institutions find the figures credible. “Over this 12-year period, Armenia has achieved spectacular income growth … and poverty reduction,” the World Bank said in a November 2007 report that reviewed the results of its lending programs for the South Caucasus state. The International Monetary Fund also noted “good progress” in poverty reduction in Armenia as it disbursed a fresh $5.2 million loan to Yerevan later in November. “The medium-term [economic] outlook is positive, with a favorable outlook for investment,” the IMF’s deputy managing director, Murilo Portugal, said in a statement posted on the fund’s website (www.imf.org).

Meeting with Armenia’s leading businessmen on December 28, President Robert Kocharian said the double-digit growth rate can be sustained in the next few years. (Statement by the presidential press service, December 28). His government, though, set more modest growth targets of between 8% and 10% in its five-year program approved by parliament in June. The program commits the government to implementing “second-generation reforms” that Western donors say are essential for ensuring continued growth. Prime Minister Serge Sarkisian and other government officials have said those reforms will result in better governance, “unconditional rule of law,” less government corruption, and fair business competition.

There is widespread skepticism about the seriousness of those pledges, which was only reinforced by the Kocharian administration in the past year. In October 2007 Kocharian, for example, controversially dismissed Pargev Ohanian, a judge who had sensationally acquitted two businessmen in a rare court ruling that went against the government’s wishes. The businessmen, who ran a leading Armenian coffee packaging company, had been arrested and charged with fraud in 2005 after publicly accusing senior customs officials of corruption. Armenia’s Court of Appeals overturned their acquittal and sentenced them to six and two years in prison in November. The developments made a mockery of the government’s stated efforts to combat corruption and boost judicial independence in the country.

The ruling regime also made it clear that it will not tolerate expressions of political dissent by wealthy entrepreneurs dependent on government connections. One of those tycoons, Khachatur Sukiasian, has been facing a government crackdown on his businesses since September 2007, when he voiced support for former President Levon Ter-Petrosian, a leading opposition candidate in Armenia’s upcoming presidential election. There were also no visible government efforts to liberalize lucrative forms of economic activity, notably imports of fuel and basic foodstuffs, that have been effectively monopolized by “oligarchs” close to Kocharian and Sarkisian. In fact, Kocharian denied the existence of such monopolies at the December 28 meeting, saying that other businesspeople are not venturing into the imports business for purely “psychological” reasons.

The obvious lack of fair competition might explain why the prices of imported products such as wheat and cooking oil went up considerably in the fourth quarter of 2007 despite the continuing strong appreciation of the national currency, the dram. The price hikes pushed up inflationary pressures on the economy, forcing the Central Bank of Armenia (CBA) to raise its refinancing rate twice. Even after that the CBA forecast that consumer price inflation will hit 7% in 2007, well above the Armenian authorities’ target rate of 4%.

The tightening of the CBA’s monetary policy was in line with the IMF’s recommendations. The fund also continued to press for further improvement in Armenian tax collection. The government’s tax revenues soared by 35% in January-November, allowing it to meet record-high spending targets set by the state budget for 2007. (Budgetary report by the Armenian Ministry of Finance and Economy, December 28). Still, those revenues made up only 16% of GDP. The proportion is very modest even by ex-Soviet standards and highlights the scale of widespread tax evasion in Armenia. The government has for years been promising to tackle the problem in earnest. But its declared crackdowns on tax fraud have so far mainly targeted small and medium-sized enterprises, with many large and far more profitable companies owned by government-linked individuals continuing to underreport their earnings.

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Armenia's controversial gold rush

Jan 8, 2008
BBC News, UK
By Kieran Cooke

As the international price of gold touches record highs, the rush is on to find and exploit deposits around the world. Old mines are being revived: new ones are opening up.

The legacy of the Soviet era is never far away in Armenia

In the town of Ararat - about an hour's drive south of Yerevan, Armenia's capital - investors from Russia have moved in to take control of what is believed to be one of the biggest gold-mining operations in the country.

The move has prompted concerns within Armenia over increasing Russian control of vital national economic interests.

In the South Caucasus, one of the world's most volatile areas, it is also raising the spectre of renewed regional conflict.

In a series of deft investment moves in recent years, Russia has used financial resources generated from sales of its vast oil and gas reserves to regain control of a number of enterprises in what were, before the early 1990s, territories of the Soviet Union.

Nowhere is this investment drive more evident than in Armenia. As a result of often secretive deals linked to the Armenian government's privatisation programme, Russian companies now control about 80% of the country's power generating facilities.

These even include a nuclear power plant at Metsamor, near Yerevan.

Gazprom, the Russian energy giant, has a majority stake in Armenia's gas network. It is also believed to have taken a controlling interest recently in a gas pipeline, now under construction, that will link Armenia with Iran.

Russian companies own most of Armenia's telecommunications network, while the country's railway system is about to be sold to Russia.

'Economic backbone'

In former Soviet times, Armenia was a centre of military-linked electronic industries. The majority of these are also now owned by Moscow-based companies.

President Vladimir Putin of Russia and his Armenian counterpart, Robert Kocharian, talked of "the truly allied character of the Russian-Armenian relationship" at a meeting in August 2007.


Not all of AGRC's assets are in great shape

But critics in Armenia accuse President Kocharian and his ministers of accumulating vast personal wealth while selling off the country's most precious assets to Moscow.

"The Russians own what is the economic backbone of Armenia," says an opposition newspaper.

"Moscow is in control of virtually all our strategic resources."

Now, in a complex and little-publicised deal, one of Armenia's biggest mining concerns, the Ararat Gold Recovery Company (AGRC), has been purchased by Madneuli Resources, a mining company based across Armenia's northern border in Georgia.

Madneuli is ultimately controlled by Industrial Investors, a powerful group of Russian financiers headed by Sergei Generalov, a former Russian energy minister turned business mogul.

Disputed terrain

AGRC has a gold processing facility at Ararat, overlooking the majestic, snow-capped mountain of the same name, where Noah and his Ark are said to have finally come to rest after the Flood.

However, AGRC's most valuable asset is a large, open-pit gold mine at Zod, in eastern Armenia, close to the border with Azerbaijan.

Mining experts say Zod has some of the richest gold deposits in the Caucasus region.

Mount Ararat is mentioned in the Bible

In the early 1990s, Armenia and Azerbaijan fought a bitter war over the disputed territory of Nagorno-Karabakh.

More than 25,000 people are estimated to have died in the conflict and hundreds of thousands of people on both sides became refugees.

Nagorno-Karabakh, which has proclaimed independence, is now in effect controlled by Armenia.

Azerbaijan has raised objections with both the Georgian and Russian authorities about the purchase of the Zod mine, describing it as unlawful.

Azerbaijan says a considerable amount of the Zod mine is in its territory, at present occupied by the Armenian military.

"Any activity in occupied territories without the permission of the Azeri authorities is illegal," says Araz Azimov, Azerbaijan's deputy foreign minister.

While a ceasefire between Armenia and Azerbaijan has been in force for the past 13 years, there are still frequent outbreaks of fighting between the two sides. The border between the two countries remains sealed.

Recently, Azerbaijan is believed to have been using its new-found oil and gas wealth to beef up its armed forces.

Abandoned

The operations of AGRC have often been the subject of controversy. In the late 1990s, Azerbaijan protested when AGRC, at the time run by a Canadian company, started mining at Zod.

In 2002, AGRC was taken over by a company controlled by the family of Indian mining billionaire Aneel Agarwal. But its operations were closed down after the Armenian authorities accused the company of reneging on various licensing agreements.

The company was charged with tax fraud and environmental violations and ordered to pay millions of dollars in fines.


Russia's Armenian asset-buying spree includes this power plant

AGRC's Indian owners denied the charges: no details of court rulings have been released, but the company was put up for sale earlier this year.

At its headquarters in Ararat, the reprocessing facility is not working and the buildings look abandoned.

Locals are concerned that cyanide, used in the course of processing gold, has been polluting land and water.

They know little about what is going on. Poverty is still widespread in Armenia and jobs are scarce.

"People were promised jobs by the previous owners, but then Indian workers were brought in," says Armen Gevorgyan, a local trader.

"We know the foreigners are after the gold. If the new owners provide some work and decent wages, that's the most important thing for us."

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WORLD BANK DEVELOPS A NEW STRATEGY OF SUPPORT TO ARMENIA

14/12/2007
Panorama.am, Armenia

Prime Minister Serzh Sargsyan received yesterday Shigeo Katsu, World Bank vice president on Europe and Central Asia.

Government information and public relations department informs that during the meeting Sargsyan mentioned that two months have passed since his recent meeting with Mr. Katsu in Washington that made a good impression. The prime minister said Mr. Katsu’s positive assessments on the Armenian economy and the reforms in the country are very inspiring and reaffirm that Armenia is on the right track. WB official confirmed his assessments saying Armenia has been the best performing country during the recent few years. He said that taking into consideration GDP growth per capital it is possible that Armenia makes a shift from funding of International Development Association (IDA) to co-financing of International Bank of Reconstruction and Development (IBRD) and later to financing by IBRD only.

Shigeo Katsu mentioned that WB has launched preparation of 2008-2012 new strategy of support to Armenia and the invested resources of cooperation with Armenia in the coming few years assume that the focus will be on the second and third generation reforms and the institutional reforms of establishments.

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Armenia should take steps to tackle inflation -IMF

Monday December 10 2007
Guardian Unlimited, UK
Source: Reuters

WASHINGTON, Dec 10 (Reuters) - Armenia's economy is growing at a double-digit clip that has helped ease poverty, but the country must take steps to curb price pressures, while the currency will probably continue to appreciate, the IMF said on Monday.

"Monetary policy will need to be tightened in light of rising inflationary risks," the International Monetary Fund said under a regular review of Armenia's poverty-reduction facility, which expires next May.

Consumer inflation is projected to average 6.3 percent next year, up from 4.3 percent in 2007, the IMF said, with economic growth of 11 percent this year and 10 percent in 2008.

The central bank raised interest rates in three steps of aquarter-percentage point each between July and November. The banking rate is now 11 percent and the repo rate 5.75 percent.

In addition, the central bank lifted its inflation target to 4 percent from 3 percent, a move that the IMF said it had opposed.

"A firm commitment to a medium-term inflation target will be critical for anchoring price expectations and building credibility in the transition to full-fledged inflation targeting," the IMF said.

The Armenian dram was also expected to continue to advance against the dollar due to persistent foreign-exchange inflows, which may harm the country's export competitiveness.

This means Armenia must step up efforts to lift domestic competition and keep fiscal policy tight, the IMF said.

It also warned that mounting infrastructure and poverty-reduction spending will increase budget pressures, and it urged the government to meet this demand for additional public finance by strengthening tax collection methods. (Reporting by Alister Bull; Editing by Jan Paschal )

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Armenia 'Ba2' rating balances low debt burden with modest development - Moody's

11.30.07

MUMBAI (Thomson Financial) - Moody's Investors Service said its stable outlook and 'Ba2' local and foreign currency debt rating on Armenia balances the low debt burden of the government and economy against the country's weak institutional capacity and modest level of economic development.

The ratings agency said Armenia's 'Baa3' foreign currency country ceiling rating for bonds are based on Moody's (nyse: MCO - news - people ) assessment of a low risk of payments moratorium in the event of a government bond default.

While Armenia's debt burden compares well with similarly rated countries, as a relatively poor nation in the process of transitioning to a market-based economy, its institutions are still relatively undeveloped, Moody's said.

Armenia's general government debt burden -- at about 17 pct of GDP and falling -- compares favourably with other 'Ba2'-rated countries. The terms of its debt are also very comfortable relative to its peers, Moody's said.

The country's double-digit growth continues, at one of the fastest rates registered in the world, reflecting the economy's small size, and the government's fiscal and monetary policies are prudent, Moody's said.

However, links between Armenia's political class and the business elite foster entrenched vested interests, while the level of financial intermediation remains low. There are also geopolitical uncertainties linked to the conflict in the Nagorno-Karabach region, Moody's said.

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Easing Armenia's Transition to a Market Economy

19 Nov. 2007
World Bank Group, DC

Challenge:

With independence in 1991, Armenia suffered a severe economic contraction. Between 1990 and 1993, GDP dropped by more than 50 percent. This led to hyperinflation, a budget deficit that reached a high of 55 percent, factory closures, little electricity supply, and large-scale emigration. About 80 percent of the population survived on humanitarian assistance and more than half the population lived below the poverty line.

Approach:

A series of 10 projects—spanning a dozen years—supported Armenia’s economic reform program to restore and maintain macroeconomic stability, create conditions for economic growth, and improve living conditions. These broad areas would form the foundation for the transformation of the economy from a centralized model to a market-based one. The program included a rehabilitation credit for 1995-1996, five structural adjustment credits between 1996 and 2004, two structural adjustment technical assistance credits between 1996 and 2002, and two poverty reduction support credits beginning in 2004 and ongoing. The technical assistance projects supported the implementation of the eight adjustment operations by providing the necessary expertise for strengthening institutions.


Over this 12-year period, Armenia has achieved spectacular income growth – by about 10 percent on average per year, rising to 13-14 percent in 2005 and 2006 – and poverty reduction – from 56 percent in 1998 to 30 percent in 2005.

Approach Highlights:
Financial Discipline and Public Sector Management
- Economic stabilization: inflation fell to 0.6 percent in 2005 from 176 percent prior to the adjustment program; the budget deficit fell from 9 percent to 1.9 percent; growth has averaged about 10 percent per year.
- Improving budget management through the adoption of a rigorous medium-term expenditure framework to manage the scaling-up of sector reforms.
- Improving customs and tax administration and broadening the tax base.
- Improved payment discipline in energy: collections increased from 30 percent to 85 percent.

Private Sector Development- Removal of nearly all price controls and trade barriers.
- Adoption of key financial legislation early in the program: a real property code, bank insolvency law, bankruptcy law, collateral law.
- Reduction in bureaucracy: Armenia ranked 34 in the World Bank Group’s Doing Business 2007 report.
- Privatization of nearly all state-owned enterprises.

Social Development:- Adoption of a poverty reduction strategy that provides a powerful tool for policy formulation.
- Significant increase in budget allocations for health and education, doubling from 2002 to 2006.
- Family poverty benefit and pensions increased by more than 50 percent during 2002-04.

IDA Contribution:

- The 10 projects totaled US$410 million of which US$382 million came from IDA financing and US$28 million from other sources-principally the Netherlands, as well as Argentina.
- Operations were in rapid succession, providing sustained financial and technical support to the government and generating a critical mass of reforms that helped to raise living standards.
- More than just providing critical deficit financing, the projects also provided a genuine opportunity for the government to benefit from external expertise. Technical assistance came from IDA and bilateral donors, with significant support from the Japanese Policy and Human Resources Development fund.
- Parallel investment operations in water, health, education and power were mutually reinforcing. For example, improved energy regulation and ownership policies supported by policy-based credits were matched by investment lending in energy.
- These policy operations were closely linked to IMF stabilization and poverty reduction programs.

Next Steps:- IDA is providing two more Poverty Reduction Support Credits that focus on supporting the government to strengthen corporate and public governance, including tax and customs, and competition policy and human development. These policy-based projects are closely linked with on-going sector-specific projects.
- The completion of the credit series will coincide with the parliamentary and presidential elections of 2007 and 2008, respectively. Future policy-based lending will depend upon budgetary needs and the government’s commitment to pursuing a reform agenda.

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Government Approves Controversial Mining Project

1, November 2007
Armenialiberty.org, Armenia
By Anna Saghabalian

Dismissing strong objections from environmentalists, the government gave on Thursday the final go-ahead for the development of a massive copper and molybdenum field in northern Armenia which will lead to the destruction of 357 hectares of rich forest.

The Teghut deposit close to the Georgian border is estimated to contain 1.6 million tons of copper and about 100,000 tons of molybdenum. The Armenian Copper Program, a large mining enterprise that extracts and smelts ore from other parts of the northern Lori region, plans to spend more than $200 million on turning the deposit into a huge mine. The Liechtenstein-based company secured the Armenian Environment Ministry’s mandatory approval of the project earlier this year.

The ministry gave the clearance despite strong resistance from Armenian environment protection groups. The latter argue that the resulting destruction of 128,000 trees would wreak further havoc on Armenia’s forests that have already shrunk dramatically since the early 1990s.

ACP admits the heavy environmental cost of its plans but says it will be more than offset by 1,400 new jobs which it has pledged to create in the unemployment-stricken depressed area. The company has also pledged to build new schools and make other investments in the local infrastructure.

The government accepted these arguments, formally approving land allocations needed for the start of open-pit operations at Teghut. ACP already began preparations for the those operations this summer.

Minister of Trade and Economic Development Nerses Yeritsian said after a weekly cabinet meeting that the government also took into consideration the opinion of local governments who are in favor of the project. “We have held detailed discussions with them and unanimously arrived at the conclusion that the benefits and revenues which the country will receive from those investments will substantially outweigh the environmental and other costs,” Yeritsian told reporters.

Yeritsian said that estimates of the resulting environmental damage are grossly exaggerated and are “not the result of serious scientific analysis.” He also argued that ACP undertook to finance the planting of tens of thousands of new trees elsewhere in Lori.

Non-ferrous metals and ores are currently Armenia’s main export products. The local mining sector is dominated by ACP and the German-owned Zangezur Copper-Molybdenum Plant operating in the southeastern Syunik region.

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ARMENIA 57TH ACCORDING TO ECONOMIC STABILITY INDICATOR

01/11/2007
Source: Panorama.am

Economy and Values Research Center recently published its annual world report on competitiveness. Armenia is in the 93rd place among 131 countries. Last year, Armenia was in the 82nd place among 125 countries. Armenia is ahead of Moldova, Tajikistan, Ghrghzstan in terms of the indicator.

USA, Switzerland and Denmark are found as the most competitive three countries. Our strategic partner, Russia, is in the 58th place.

According to the same publication, Armenia continues to take 57th place in terms of the indicator of economic stability. Low level of inflation and small state debt as compared with GDP contributed to such figure. Armenia is in the 99th place in terms of health and elementary education. In terms of market effectiveness, the country is in the 104th place.

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IMF satisfied with Armenia’s economic development

Friday, September 21 , 2007, #180 (1447)
Messenger.ge, Georgia
By M. Alkhazashvili(Translated by Diana Dundua)

IMF analysts concluded after a five-day visit to Armenia that positive economic results, combining high economic growth with low inflation and gradual tax increase, will continue throughout 2008 and beyond.

The success of the Armenian economy was put down to a good business climate for foreign investments, the news agency Regnum writes.

Much of the development there is driven by remittances and foreign cash infusions, which are pushing up inflation and the value of the national currency, the team found, though not drastically so.

In a meeting with Lorenzo Perez, deputy director of the IMF Middle East and Central Asia Department, Armenian President Robert Kocharian thanked the IMF for supporting its economic reform process.

“The only correct way for the country to develop is by effective reforms and we are totally ready to continue this way,” Kocharian said.

Perez commented that the main problem Armenia faced was moving on to the next stage of development.

© The Messenger. All rights reserved. Please read our disclaimer before using any of the published materials.

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In January-August of 2007 Armenia’s GDP grew by 13,6%

Sept. 20, 2007
Banks.am, Armenia

Yerevan, September 20 /Mediamax/. The growth of Armenia’s GDP in January-August of 2007 totaled 13,6%, as compared to the same period of 2006.

As the press service of the National Statistical Service of Armenia told Mediamax today, the GDP volume in January-August of 2007 totaled 1651085.4mln drams.

The volume of industrial production in the republic in January-August of 2007 stood at 446399.5mln drams, having increased by 1.7%, as compared to the same period of 2006.

The average monthly salary in Armenia in January-August of 2007 increased by 21.5%, as compared to the same period of 2006, thus making 73631 drams.

The salary of budget organizations has increased by 24.2%, making 53943 drams during the accounting period, and the salary of non-budget organizations stood at 91843 drams (growth – 19.9%).

Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.

Kocharian Forms New Body To Tackle Tax Fraud

Armenialiberty.org, Armenia - Sep 18, 2007
By Emil Danielyan

Just days after lambasting tax authorities, President Robert Kocharian has set up an ad hoc commission tasked with helping to ensure that the Armenian government’s tax revenues reach the level of “civilized countries.”

Kocharian’s office said late Monday that the inter-agency commission will be headed by the chief of the State Tax Service (STS), Vahram Barseghian, and comprise officials from the presidential administration and the State Customs Committee (SCC). Representatives of the police, the National Security Service and the Prosecutor-General’s Office will also sit on the body.

A statement by the presidential press service said its main function will be to crack down on widespread tax fraud and curtail the huge informal sector of the Armenian economy. It said the commission held its first meeting, chaired by Kocharian, earlier on Monday.

Kocharian was cited as demanding a “serious fight against shadowy economic activities.” He reminded commission members that Armenian tax revenues still make up a disproportionately low share of Gross Domestic Product despite having risen considerably in recent years. They must strive to make sure that Armenia’s tax/GDP ratio comes close to that of “civilized countries,” he added, according to the statement.

The proportion was below 14 percent last year and will at best reach 15 percent this year, one of the lowest indicators in the former Soviet Union.

“The amount of taxes we collect is small,” Prime Minister Serzh Sarkisian said late last week. “To begin with, we must first raise it to the level of medium-income countries. This will be one of my most important tasks.”

Kocharian set up the special body five days after accusing the STS and the SCC of failing to combat tax evasion, tolerating corruption within their ranks and giving privileged treatment to some businessmen. He told the two bodies to suggest concrete ways of addressing these problems and instructed law-enforcement authorities to “identify and strictly punish tax and customs officials engaged in favoritism.”

Many of Armenia’s wealthiest entrepreneurs are believed to grossly underreport their earnings, ranking suspiciously low on the lists of leading corporate taxpayers regularly released by the STS. Some of the so-called “oligarchs” have close ties with Kocharian and Sarkisian.

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In January-June of 2007 Armenia’s GDP grew by 11,2%

Banks.am, Armenia - Jul 20, 2007

Yerevan, July 20 /Mediamax/. The growth of Armenia’s GDP in January-June of 2007 totaled 11,2%, as compared to the same period of 2006.

As the press service of the National Statistical Service of Armenia told Mediamax today, the GDP volume in January-June of 2007 totaled 944845.7mln drams.

The volume of industrial production in the republic in January-June of 2007 stood at 327954.9mln drams, having increased by 1.4%, as compared to the same period of 2006.

The average monthly salary in Armenia in January-June of 2007 increased by 20.5%, as compared to the same period of 2006, thus making 71344 drams.

The salary of budget organizations has increased by 22.1%, making 52491 drams during the accounting period, and the salary of non-budget organizations stood at 88961 drams (growth – 20.1%).

Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.

In January-May of 2007 Armenia’s GDP grew by 10,2%

Jun 21, 2007
Banks.am, Armenia

Yerevan, June 21 /Mediamax/. The growth of Armenia’s GDP in January-May of 2007 totaled 10,2%, as compared to the same period of 2006.

As the press service of the National Statistical Service of Armenia told Mediamax today, the GDP volume in January-May of 2007 totaled 684339.8mln drams.

The volume of industrial production in the republic in January-May of 2007 stood at 265697.6mln drams, having increased by 1.2%, as compared to the same period of 2006.

The average monthly salary in Armenia in January-May of 2007 increased by 18.0%, as compared to the same period of 2006, thus making 71016 drams.

The salary of budget organizations has increased by 16.6%, making 52221 drams during the accounting period, and the salary of non-budget organizations stood at 88659 drams (growth – 18.0%).

Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.

Armenia’s foreign trade turnover in January-May of 2007 increased by 39,1%, thus making over $1,5bln

Jun 21, 2007
Banks.am, Armenia

Yerevan, June 21 /Mediamax/. The foreign trade turnover of Armenia in January-May of 2007 totaled 551.8bln drams or $1536.33mln, having increased by 39,1% as compared to the same period of 2006.

As the press service of the National Statistical Service of Armenia told Mediamax today, the export volume during the accounting period made 152.0bln drams or $423.58mln, and the import volume totaled 399.8bln drams or $1112.75mln.

The deficit of the foreign trade balance in January-May of 2007 stood at 247.8bln drams or $689.17mln.

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European Bank Warns Of Armenian Growth Pitfalls

Jun 19, 2007
Armenialiberty.org, Armenia
By Emil Danielyan

The ongoing appreciation of the dram will endanger continued economic growth in Armenia unless local companies increase their productivity, according to the European Bank for Reconstruction and Development (EBRD).

“Without faster productivity gains, a further appreciation of the Armenian currency would threaten the country’s competitiveness,” the EBRD warned in an explanatory appendix to an economic report that will be debated the Council of Europe’s Parliamentary Assembly next week.

The Armenian dram has gained more than 50 percent in nominal value against the U.S. dollar since the start of its dramatic rise in late 2003. The process slowed down in the first quarter of this year only to gain new momentum last month. Local manufacturing firms claim to have been hit hard by the dram’s appreciation, criticizing the Armenian authorities for their refusal to intervene in the foreign-exchange market.

The authorities and the Central Bank in particular have dismissed the criticism, arguing that the much stronger dram is the inevitable result of recent years’ surge in hard currency remittances sent home by hundreds of thousands of Armenians living and working abroad. They say the manufacturing sector can successfully adapt to the new reality with productivity gains.

Central Bank officials say the exchange rate fluctuation has also suppressed inflation which has remained in single digits despite the country’s robust economic growth. The World Bank and the International Monetary Fund take a similar view, having repeatedly endorsed monetary policies pursued by the Armenian authorities. A senior IMF economist went farther late last month, saying that the dram’s strengthening has actually spurred economic growth.

The EBRD, by contrast, seems more worried about the trend. In an annual report issued last month, the London-based lending institution, which is tasked with facilitating former Communist countries’ transition to market-based economics, listed continued currency appreciation among factors which it believes pose “significant risks for the [Armenian] economy in the medium term.” The other factors included Armenia’s “vulnerability to commodity prices,” dependence on low-interest loans and grants from Western donors, and skyrocketing real estate prices.

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Highest inflation rate recorded in Tajikistan and Azerbaijan

06 Jun 2007 18:05
Azeri Press Agency, Azerbaijan

The highest rate of inflation in CIS countries was recorded in Tajikistan and Azerbaijan within the first three months of 2007, CIS Statistical Committee publicized the records about the inflation rate in member states, APA reports.
Inflation within first three months in Azerbaijan was 16.5% compared with January-March last year.
Tajikistan is the leader among CIS countries (18.3%).
Increase of consumer prices was 11.7% in Moldova, 10.3%in Ukraine, 9.8% in Georgia, 8% in Kazakhstan, 7.5% in Belarus, 4.7% in Armenia and 4.5% in Kyrgyzstan in January-March. /APA/

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Fitch cautions on future policy risks

06 Jun 2007
Budapest Business Journal, Hungary

The US ratings agency in its latest evaluation assigned positive ratings to only three out of twenty Emerging European countries; Armenia, Kazakhstan and Ukraine.

Credits risks in Europe's emerging economies are growing, especially in the Baltic states, where the economies are showing signs of overheating and the process of entering the Eurozone is delayed, Fitch Ratings said.

The US ratings agency in its latest evaluation assigned positive ratings to only three out of twenty Emerging European countries; Armenia, Kazakhstan and Ukraine, while Hungary and Latvia received negative outlook. Commenting on Hungary's budget adjustments, Fitch said it is seeing 'good progress': the government has made a strong start and Hungary's government deficit may come in below the original target this year. But the government will face a serious challenge in the H2 of its term, when risks of lax spending will clearly grow, Fitch warned. It also said that despite Hungary’s promising budget corrections and improving external balance it is unlikely to upgrade the country's credit rating from negative to stable any time soon as question marks persist over its inflation and growth prospects. (Gazdasági Rádió, Napi Gazdaság)

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Armenia Posts 44% Increase in Foreign Investments in Q 1

June 5, 2007
Armenia Diaspora, Armenia

Yerevan, June 4 /Armenpress/ Foreign investments in the Armenian economy in the first quarter of 2007 rose 44.6 percent from a year ago to $136.6 million. This figure did not include money received by the government and the Central Bank from external sources.

Armenian National Statistical Service said almost 30 percent of direct investments or $26.4 million, generated from privatization of different entities. This not counting the amount of direct investments from a year ago rose 16,3 percent and that of indirect investments grew 37.5 percent.

The biggest foreign investment in January-March, $67.1 million, came from Lebanon, followed by Russia with $32.6 million.

Some 65 percent of foreign investments in real sector of economy and 63 percent of direct investments went to the communication sector, 6.6 percent of direct investments went to aviation and 6.5 percent to food and beverage sectors.


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