By Atom Markarian and Shakeh Avoyan
Armenia’s economy will continue its robust growth and enable a further increase in public spending on education and social programs in the next few years, according to the Armenian government’s mid-term economic outlook made public on Thursday.
The document presented by Deputy Finance and Economy Minister Pavel Safarian forecasts that Gross Domestic Product will rise at an annual rate of at least 6 percent from 2007 through 2009.
Official statistics show that the Armenian economy expanded by 12 percent in the first four months of this year, putting it on track to register a double-digit growth for a sixth consecutive year. Safarian said continued growth is expected to raise the country’s GDP per capita, a key indicator of living standards, from the current $1,600 to $2,300 by 2009.
Armenia’s macroeconomic performance in recent years has been repeatedly praised by the International Monetary Fund and the World Bank. Both financial institutions have endorsed the government’s assertions, challenged by some local economists, that the growth has considerably reduced widespread poverty.
The Armenian macroeconomic figures also drew praise this week from Fitch, a Western credit rating agency. It gave Armenia the first-ever “sovereign credit rating” of BB- and offered a “stable outlook” for its economy.
“Impressive economic performance has been underpinned by a robust and coherent macroeconomic policy framework and wide-ranging structural reforms that have enhanced the capacity of the economy to absorb adverse shocks,” the private agency said in a statement.
The BB- rating, which puts Armenia on a par with Turkey and Brazil, indicates a relatively high risk of doing business in a country. Still, the chairman of the Armenian Central Bank, Tigran Sarkisian, insisted on Tuesday that it will boost potential foreign investors’ interest in Armenia.
Fitch argued that the Armenian economy remains “vulnerable to shocks” due to its low level of monetization and financial intermediation. It said that in order to reduce that risk the authorities in Yerevan should do more to “strengthen governance and the still relatively immature political system, as well as reduce the high level of corruption.”
Speaking to journalists, Safarian, said the anticipated growth will enable the Armenian government to raise the average salary of civil servants and school teachers by 40 percent to 124,000 drams ($295) and 82,500 drams respectively in the next three years. He said the government will also raise its tiny monthly pensions and poverty benefits by 2,000 drams each year.
The Armenian military will be another major beneficiary of growing public expenditures. The government plans to increase it budget by almost 22 percent to 90 billion drams ($212 million) next year. “Defense is a high priority area for us for obvious reasons,” Safarian said, referring to Azerbaijan’s skyrocketing defense spending.
The Azerbaijani defense budget is due to total $600 million this year and may well reach $1 billion in 2007 thanks to Baku’s soaring oil revenues.