By Atom Markarian
The Armenian economy which has grown steadily since the mid-1990s will run out of steam in the next several years unless the authorities take radical steps to improve the investment climate in the country, a senior World Bank economist warned on Saturday.
“Factors that fuelled growth in the last five or six years are not long-term ones, and that is of great concern to us,” said Lev Freinkman, the bank’s chief Armenia expert. “Armenia is today one of the world’s biggest per capita recipients of external assistance, and that can not last long,” he told RFE/RL in an interview.
The warning was at the heart of Freinkman’s extensive report on the state of the Armenian economy unveiled at a two-day meeting of Western donor states and organizations in Paris earlier this week. Some of its assertions contrasted with the overall positive assessment of Yerevan’s economic policy given by the donors.
A World Bank press release issued on Thursday summarized their main conclusions. “The country has made visible progress in price liberalization, enterprise restructuring, and the establishment of a market-oriented legal framework,” it said. “Major achievements of the recent reform program include the restructuring of the financial and energy sectors, and increased spending on health and education.”
The donors -- which also included the International Monetary Fund, the US government and the European Commission -- also noted “good progress” in the government’s efforts to remove administrative barriers to business, combat corruption and reform the Armenian civil service.
However, Freinkman’s report strongly criticized the business environment in Armenia, saying that its authorities should not only stop interfering with economic activities but also support newly created private firms. Speaking to RFE/RL, the economist said: “The point is this: ‘You guys are growing six percent a year in a complete mess. So imagine how fast you will grow if you put some effort.’”
The donors, which pledged to provide $620 million in fresh loans and assistance to Armenia in the next three years, expressed concern that “despite strong macroeconomic performance, 55 percent of the population still lives below the poverty line.” “There was a general recognition that reduction of migration and unemployment as well as poverty alleviation in Armenia require a stronger and more sustained focus on economic growth, through mobilizing increased private sector investment,” their statement said.
The World Bank’s country director for the South Caucasus, Judy O’Connor, said the authorities should “accelerate reforms” to improve the investment climate. “With renewed reform momentum we expect to see sustained economic growth and more job creation, and thereby an increase in living standards and a reduction in poverty,” she said.