According to government statistics, the Armenian economy grew by 2.4 percent last month after contracting by 14.4 percent in 2009. Trade and Economic Development Minister Nerses Yeritsian seized upon the figure on Monday to declare the end of a serious economic downturn that gripped the country more than a year ago.
Aristomene Varoudakis, head of the World Bank office in Yerevan, questioned this claim, saying that the January growth only means that “the acute phase of the crisis is over.” “But it doesn’t necessarily mean that the crisis is over because the economy contracted by 15 percent last year,” he said.
“If it grows by 2 percent this year and perhaps 3 or 4 percent next year, it will take three to four years for the economy to come back to the income level of 2008,” Varoudakis told a news conference. “So it is very likely that the economy will remain weak for quite a prolonged period of time.”
Armenia’s Gross Domestic Product increased at an average annual rate of around 10 percent in the decade preceding the recession. The Armenian government forecast late last year a GDP growth rate of 1.2 percent for 2010. A senior official from the International Monetary Fund said last week that it could exceed 2 percent.
Varoudakis stood by the World Bank’s view that renewed robust growth is contingent on a greater diversification of the Armenian economy that in turn requires a radical improvement of its investment climate. He said the authorities in Yerevan have taken some “steps in the right direction.”
“But I think what is missing there is some bold initiatives, bold and ambitious steps to reduce the role of oligopolies in the economy,” stressed Varoudakis. “As long as some important markets, especially for imports, are dominated by oligopolistic players, this reduces the possibility for other market entrants, especially small enterprises to grow and make money and invest in other sectors of the economy.”
“Also, it will be very important to have transparency regarding possible linkages between dominant businesses and public officials,” he said, clearly referring to the widely held belief that the so-called “oligarchs” enjoy high-level government patronage.
The World Bank’s managing director, Ngozi Okonjo-Iweala, issued a similar warning, in blunter terms, when she visited Yerevan last October. She said Armenia can not attain a higher level of development unless its leadership improves tax administration, creates a “strong and independent judicial system” and combats government corruption in earnest.
Prime Minister Tigran Sarkisian has publicly acknowledged the need for such reforms. Addressing parliament in November, he said the oligopolistic structures “pose a very serious challenge” to the state. Some observers believe, however, that he lacks the power and political clout to take on them.
Varoudakis commented on the economic situation as he announced the disbursement of two fresh World Bank loans to Armenia worth $12 million. One of the loans worth $7 million is designed to finance infrastructure projects in 35 mostly rural communities across the country.
The bank already financed such projects last year as part of its efforts to help the authorities mitigate consequences of the crisis. Its overall anti-crisis lending to Yerevan totaled $280 million in 2009.