Membership in a Russian-led trade alliance alone will not speed up Armenia’s economic development and needs to be complemented by closer commercial ties with Europe, the World Bank cautioned on Friday.
“Assume that Armenia does join the Eurasian Economic Union (EEU) and fully exploits all of the opportunities there,” said Laura Bailey, head of the bank’s Yerevan office. “Is that enough for Armenia’s economic growth? The World Bank would say no. We would say that Armenia should be more ambitious.”
“After it has joined the EEU and fully exploited all the possibilities, Armenia should also see what other opportunities there are to continue to deepen and strengthen its trade relationships with member states in the European Union, even if they are not part of that formal partnership. It would be this ability to creatively exploit as many different markets as possible, without being locked into a bloc, that will determine the dynamism of Armenia’s economy in the medium term,” Bailey told RFE/RL’s Armenian service (Azatutyun.am) in an interview.
“You have to choose where your primary markets are but don’t ignore other markets,” she said. “Imagine if a country in Asia had focused exclusively on the United States for the last 20 years and not noticed what was happening in China. Imagine how much they would have lost.”
Armenia - Laura E. Bailey, the World Bank country manager for Armenia, 3Oct2014
Armenia was on track to sign a far-reaching free trade deal with the EU until President Serzh Sarkisian unexpectedly decided last year to join Russia’s customs union with Belarus and Kazakhstan, which is currently transformed into the EEU. Sarkisian and his government say that membership in the EEU would earn Armenia significant economic benefits given its traditionally close ties with Russia, its single largest trading partner and main source of vital remittances from Armenian migrant workers. They have also argued that Russia will keep supplying natural gas to the South Caucasus nation at knockdown prices.
Domestic critics of Sarkisian’s policy U-turn dismiss these arguments, saying that the Armenian government simply bowed to strong pressure that was exerted by Moscow for geopolitical reasons. They say that joining the Russian-led bloc could actually hurt the Armenian economy now that Russia is plunging into recession amid economic sanctions increasingly imposed by the West.
The International Monetary has revised downwards its growth outlook for Armenia, singling out the fallout from Russia’s economic slowdown. A senior IMF official said earlier this week that Armenian growth will slow to around 2.6 percent this year.
Bailey came up with a virtually identical growth forecast, which is well below the Armenian government’s most recent projections. She said that the World Bank expects growth to accelerate to 3.5 percent in 2015.
As well as stressing the economic importance of EEU membership, the authorities in Yerevan say that they remain committed to deepening ties with the EU, Armenia’s main trading partner on aggregate. In particular, Sarkisian has repeatedly claimed that Armenia will become more attractive to Western investors seeking tariff-free access to the Russian market. “Armenia’s integration into the Eurasian Economic Union opens up new horizons for foreign investors that could penetrate the common EEU market via the Armenian economic zone,” he told a Greek-Armenian business forum in Yerevan on Tuesday.