The World Bank still expects the Armenian economy to grow by over 4 percent this year despite the risk of “external shocks” that could slow its recovery, the head of the bank’s Yerevan office, Jean-Michel Happi, said on Friday.
“Today our baseline scenario still projects growth in the range of 4.2 percent for 2012 and 2013,” Happi told a news conference. But he cautioned that this and other economic projections could be revised later this year “in the light of the ongoing crisis in Europe.”
“Obviously, Armenia, given the openness of its economy, is still exposed to external shocks, which may indeed affect those projections, whether through depressed prices of its main export commodities, slower foreign direct investment or reduced remittances,” he said.
The Armenian government agrees that Europe’s financial troubles could have negative consequences for the domestic economy. Finance Minister Vache Gabrielian spoke earlier this month of “considerable macroeconomic risks emanating from the euro zone.” Still, he said the government has no plans yet to revise downward its macroeconomic outlook.
Armenia was already hit hard by the last global financial crisis. Its Gross Domestic Product shrunk by 14 percent in 2009. Economic growth resumed in 2010 and accelerated last year.
Another consequence of that recession was a sharp increase in the country’s external debt that currently stands at roughly $3.8 billion. More than 40 percent of this sum is owed to the World Bank.
Opposition politicians and economic analysts have expressed serious concern about the much heavier debt burden, questioning the Armenian authorities’ ability to manage it in the medium term.
While calling such concerns legitimate, Happi said the authorities do have a plan to keep the debt manageable. “The government has adopted a strong fiscal and debt consolidation program which will allow to bring that debt to a more sustainable level in the long run,” he said, adding that continued economic growth and greater exports will be critical for its implementation.