YEREVAN (Combined Sources)–The Armenian economy could contract by as much as 20 percent this year, Prime Minister Tigran Sargsyan said on Tuesday, blaming Armenia’s oligarchs and a widespread shadow economy for stymieing the country’s economic development and deepening its current economic crisis.
“Oligopolies, or high concentration of dominant entities on the market, create certain inconveniences in the pricing process,” Sargsyan was quoted by Arminfo news agency as saying. Anti-trust regulations will be tightened to create a more competitive pricing environment, he said.
Addressing a business forum on the international financial crisis’s effects on the Armenian economy, Sargsyan added that black market businesses also handicap the economy. “This problem is way more serious than it may seem,” he said, promising to improve tax and customs administration.
In what appears to be a further downward revision of his government’s earlier macroeconomic forecasts, Sargsyan predicted three possible scenarios for Armenia’s economic development in the coming months. “One is that we will have a [GDP] decline of 9.5 percent; the second one is that it will make up 16 percent; and the third one is that we will have a 20 percent decline.”
According to official statistics, Armenia’s GDP shrunk by 15.7 percent year on year in the first five months of 2009 amid a deepening fallout from the global economic recession. Armenian officials have said in recent weeks that the dramatic decline will ease in the second half because of hundreds of millions of dollars in anti-crisis loans provided by foreign lending institutions and governments. Sargsyan said at a cabinet meeting last week that a $500 million Russian loan alone would help to improve the country’s macroeconomic performance already in the third quarter of 2009.
The prime minister made clear, however, that such an improvement should not be anticipated before the fourth quarter. He argued that the Armenian economy still expanded at a double-digit rate in the third quarter of last year, just before it was hit by the global downturn.
One of the consequences of the recession has been a serious shortfall in tax revenues that has put the execution of the government’s record-high budget for 2009 at risk. Sargsyan stated that the government is “not inclined” to cut projected spending and will use about $360 million of the attracted external loans for financing the increased budget deficit. As a result, he said, the deficit could exceed a maximum level of 7.5 percent of GDP set by law.