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Oppositionist Blames Armenian Government For Economic Slump


Armenia -- Former Prime Minister Hrant Bagratian is interviewed by RFE/RL on November 2, 2009.

Armenia -- Former Prime Minister Hrant Bagratian is interviewed by RFE/RL on November 2, 2009.

Hrant Bagratian, a prominent opposition politician and economist, insisted on Monday that the sharp contraction of the Armenian economy this year is the result of what he called failed government policies, rather than the global economic crisis.

In an interview with RFE/RL, Bagratian claimed that Armenia’s robust growth of the previous decade would have come to an end even without the worldwide recession because of its heavy dependence on construction and the existence of economic monopolies.

“Armenia’s 18 percent [GDP] decline has nothing to do with the [outside] world,” he said. “The world economy is down by 1.5 percent.”

“The crisis was an occasion for the start of what was going to start,” he said. “It was an occasion for seeing that it was inadmissible to do $3 billion worth of luxury construction. In a country like ours they usually do social [housing] construction.

“It was inadmissible to give the right to do that construction to a handful of people. It was inadmissible to have such monopolies. It’s impossible to reduce the price of any goods.”

Armenia’s Gross Domestic Product shrunk by 18.3 percent in the first nine months of this year. The decline, one of the sharpest in the world, would have been less severe without a more than 50 percent slump in construction. The local construction sector had expanded rapidly in the previous years on the back of soaring cash inflows from Armenians working abroad and Russia in particular. Those have fallen dramatically since last fall’s global credit crunch.

The Armenian government expects the GDP drop to ease to 15-16 percent by the end of the year because of its stimulus measures and improving economic situation around the world. The International Monetary Fund and the World Bank have made similar growth forecasts.

“Are we now delighted with a 16 percent contraction?” scoffed Bagratian. “Such a bad situation existed only in the second half of 1992.”

Bagratian, who served as prime minister from 1993-1996 and is now a senior member of the main opposition Armenian National Congress (HAK), went on to denounce the government’s failure to execute its budget for 2009 which had been drawn up before the crisis. “Instead of a $3 billion budget for 2009, which was a presidential promise [given by Serzh Sarkisian] during the 2008 election, we are going to have a budget worth $1.8-1.9 billion,” he said.

Finance Minister Tigran Davtian said last week that government spending this year will likely total roughly 900 billion drams ($2.34 billion), down from 945 billion drams envisaged by the 2009 state budget. He blamed that on a shortfall in tax revenues resulting from

The government collected 371 billion drams in various taxes and duties in January-September 2009, falling short of its budgetary target by 13 percent. Bagratian stressed that the government has failed to make up for the shortfall even after securing hundreds of millions of emergency loans from external sources. He claimed that the 26 percent depreciation of the national currency, the dram, against the U.S. dollar alone should have been enough to avoid spending cuts.

Bagratian at the same criticized the government’s draft budget for 2010 which calls for a nearly 10 percent reduction in government expenditures. He said the government will fail to execute it unless it obtains more anti-crisis loans from abroad.
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