YEREVAN (Combined Sources)–The Armenian economy will likely stop growing and could even contract this year because of the deepening impact of the global recession, a senior official from the World Bank said on Wednesday.
“I think at best one could expect flat growth,” said Aristomene Varoudakis, head of the World Bank office in Yerevan. He pointed to official statistics that showed Armenia’s Gross Domestic Product shrinking in the fourth quarter of last year.
The fourth-quarter drop explains why full-year economic growth in Armenia’slowed to 6.8 percent in 2008 after six consecutive years of double-digit expansion. The economy is being hit increasingly hard by recent months’ fall in international prices for non-ferrous metals and large-scale cash remittances from Armenia’s working abroad.
Varoudakis did not exclude that the worsened economic outlook may force the Armenian government to revise its spending and targets for 2008 downwards. “It is very important for the budget to reflect the economic situation so that the government, the National Assembly and the public know what the necessary measures are,” he told journalists.
Meanwhile, the World Bank disbursed late Tuesday $85 million in loans designed to help mitigate the global economic downturn’s impact on Armenia. The largest of these loans, worth $50 million, will be provided to several Armenian commercial banks that will in turn lend the funds to local small and medium-sized businesses in need of credit. Another $25 million will be spent on the construction of rural roads and other infrastructure, which is due to start this spring.
“These projects will support urgent local works that can be implemented largely over this year to provide immediate employment opportunities,” Asad Alam, a World Bank regional director, said in a statement. “They will also help strengthen infrastructure connectivity particularly in rural areas, meet business needs, and upgrade social infrastructure that will foster medium-term growth and improvement in living standards.”
The road and infrastructure projects will renovate 100 km of roads in 7 provinces of throughout Armenia (Shirak, Gegharkunik, Aragatsotn, Lori, Tavush, Armavir and Vayots Dzor), according to Varoudakis, who noted that the project will create 800 new jobs in Armenia.
The loans will also provide 55 of Armenia’s poorest communities with significant investmen’s in their community infrastructure, supporting the building or renovation of schools and community centers, and the repair of clean drinking water systems. The community revitalization plan will create up to 350 new jobs, Varoudakis said.
The disbursed loans are part of at least $525 million in total assistance which the World Bank has pledged to provide to Armenia in the next four years. Officials have said that the bank’s commercial lending arms could raise the total to $800 million.