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The dramatic decline in construction, a key factor behind Armenia’s ongoing economic recession, will ease in the second half of this year thanks to wide-ranging measures taken by the government, Urban Development Minister Vartan Vartanian said on Friday.

The volume of construction work carried out in the country shrunk by more than half in the first half, significantly contributing to a GDP fall of 16.3 percent shown in official statistics. The construction sector’s rapid expansion in the past decade was one of the reasons why the Armenian economy grew at double-digit rates before being hit hard by the global credit crunch.

Accordingly, the sector has been a focal point of government efforts to alleviate the consequences of the crisis. Last April, the government approved 20 billion drams ($55 million) in loan guarantees to private developers struggling to complete their housing projects. Five construction firms have reportedly received such guarantees since then.

The government also plans to spend just over one quarter of a $500 million anti-crisis loan provided by Russia on housing construction in Armenia’s northern regions still reeling from the devastating 1988 earthquake. Another $33 million portion of the loan is to be channeled into a recently established state mortgage fund tasked with providing relatively cheap housing loans to the population.

Armenia -- Urban Development Minister Vartan Vartanian, undated
“There is quite a bit of [construction] activity in the second half,” Vartanian told RFE/RL. “The government has taken all necessary measures and I am sure that quite positive results will be observed in the second half, both in [private] housing construction and projects financed from the state budget.”

Prime Minister Tigran Sarkisian appeared to share the minister’s optimism as he addressed on Friday dozens of construction specialists who marked a professional holiday, officially known as Builder’s Day. “I am convinced that as a result of the anti-crisis measures taken by the government we will emerge from the existing situation with minimal losses,” said Sarkisian.

Speaking an economic forum in Yerevan last month, Sarkisian complained that the Armenian economy has grown too dependent on construction. He said its renewed growth needs to also be driven by export-oriented manufacturing sectors.

The government support for the construction industry was strongly criticized earlier this week by Hrant Bagratian, a former reformist prime minister currently affiliated with the main opposition Armenian National Congress. Bagratian said the government should concentrate instead on stimulating demand for new housing and commercial space. He did not comment on the state mortgage lending scheme, which is supposed to serve that purpose.

“I disagree with [Bagrartian’s] view,” said Vartanian. “In providing state support, the government does takes the demand into account.”
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