"Fact" daily writes:
The past year was "special" especially in that a number of negative phenomena in the economy deepened, the reason for which is that actions aimed at preventing the development of these negative phenomena were not taken. After the start of the Russian-Ukrainian war that started in 2022, as a result of the sanctions against Russia, new economic opportunities opened up for Armenia, but it was not possible to take advantage of all opportunities. For example, after the departure of Western companies in Russia, Armenian business representatives could establish themselves in the Russian market, but instead, Armenia assumed an important role only in the re-export sector. If in the beginning we were dealing with the re-export of equipment and machines, then in 2024 the re-export took on a highly polarized form, becoming dependent on one direction of activity.
Under these conditions, the locomotive for ensuring the economic growth of Armenia became the re-export of gold and precious stones, when the raw materials were imported from Russia and exported mainly to UAE and Hong Kong. It is clear that this situation could not last long, because the situation in the world is changing very quickly. That's why, starting from the second half of the year, the growth of the jewelry sector started to slow down, the export rates also started to decrease, which in turn revealed the decline in the competitiveness of the export sector of the economy. And since there was no vibrancy in the visible sector of the economy to fill the vacuum created by the decrease in the re-export of jewelry, such a situation also led to a reduction in the rate of economic activity. As a result, in October we had the lowest indicator of economic activity this year - 4.2%, which is about 2.8 percentage points lower than the indicator of the previous month. The actual current situation indicates that the economy of Armenia continues to be dependent on endogenous factors, the negative impact of which gradually becomes visible. Instead, Armenia's internal potential is not being used. Armenia has opportunities for organizing production, which are not realized. This year, too, the government did not take measures to create a favorable investment and legislative environment for the organization of production.
Against the backdrop of a decrease in the rate of economic activity, this year was also notable for a record increase in the volume of public debt, amounting to about 12.6 billion dollars. Let's keep in mind that the state debt increases by more than 100 million dollars every three months. Moreover, the fiscal year showed that this pace is accelerating over time. If the rate of debt growth continues in the following years, Armenia may face financial stability problems and a reduction in the ratings of international rating agencies. And it is not the case that the debt also serves the purpose of stimulating some directions of the economy. With them, the problem of closing the gaps in the budget is solved, which cannot have an additional effect.
And since new cracks are constantly opening in the budget, the government is ready to attract as many credit funds as possible. The past year was also notable for the promotion of initiatives aimed at increasing the tax burden. All the while, the authorities were thinking in which areas they could introduce new taxes and duties. As a result, there is a transition to tax equalization, when the tax benefits given to small and medium-sized businesses are eliminated, as a result of which this business sector loses its competitiveness compared to large ones. It is expected that next year will be even heavier in terms of tax burden. During the past year, it was also noticed that the financial system in Armenia is facing problems related to imbalance.
This imbalance is manifested by the inefficiency of the lending structure and the distribution of financial resources. In the banking sector of Armenia, mortgage and consumer loans continue to grow at a high rate, and against this background, lending to the productive sector of the economy is decreasing. And the slowdown in lending to industry and production reduces and limits the long-term growth opportunities of the economy.
ARSEN SAHAKYAN
