By Albert Khachatryan

Armenia’s GDP is showing an unfavorable tendency. The 2.2% GDP growth registered this January, which reached the highest point, 8.8%, this May, later showed a downward tendency and went down to 2.4% this January-October.

Since June, 2010, a significant decline in the gross agricultural output, caused by unfavorable weather, has had its negative impact on GDP. The result was a catastrophic decrease in fruit and vegetables yield.

However, incriminating unfavorable weather alone with the situation in the Armenian agricultural sector would mean ignoring the grave problems that have been observed for a long period. From 2004 to 2008, the areas under crops decreased by 20,700 hectares or by 6.4%. The decrease was not at all compensated for by enlarged areas under orchards and vineyard – by 2,000 and 1,900 hectares respectively.

That was an alarming symptom of farms phasing down their activities, which was ignored by the RA Ministry of Agriculture and by the RA Government. The decrease in animal produce and fish production – 2.4% and 8.2% respectively - which cannot be accounted for by unfavorable weather, was an indicator of the worsening situation.

Interestingly, a number of Armenian MPs recently paid their attention to the unfavorable situation in the Armenian fish industry. They pointed out the unfulfilled potential and the need for government assistance. A belated, but positive change.

The Armenian industry is registering two-digit growth (9.8% this January-October), we should not be too happy about it. It is common knowledge that the situation in the nonferrous metal market has had a positive impact on the mining industry, which, in turn, served as locomotive for the metalworking industry. As regards the industries working for the local market, the situation leaves much to be desired.

This January-September the output of meat products, vodka and liquors, and cigarettes showed a decrease as compared with last January-September – 9.8%, 13.2% and 2.8% respectively. The output of some light industry products slightly decreased as well. Import must have played its role.

Many products showed a considerable increase in output. However, we can only guess at the reasons why this increase failed to have a positive impact on retail turnover, which has not shown any upward tendency since the beginning of this year.

This January-October, retrial turnover showed a symbolic increase of 0.7%. The monthly retail turnover per capita, 26,900 AMD (about U.S. $71) is not at all evidence of high consumption capable of slowing down the increase in retail turnover. The 7.9% inflation this January-October “devours” the increased wages (a 7.6% average increase), preventing housewives in socially vulnerable families from boosting family consumption. Even increased money transfers failed to improve the situation.

With increasing imports, the consumption situation is an alarming symptom. Home-made products are supposedly gradually ousted from the Armenian market by their imported counterparts, one of the examples being vodka, which is not so essential for the population.

The euphoria over the GDP growth in the first half of this year seems to be evaporating. The construction sector, which recently ensured two-digit GDP growth, is showing a steady downward tendency (a 5.1% decline this January-October), without any hopes for its once great influence. The decline in the agricultural sector is so dramatic that next year will certainly see at least some increase in gross agricultural output. However, even with such prospects, it can hardly be considered a solution to problems of both the agricultural sector and economy as a whole.

If 2%±0.5% GDP growth is registered this year, Armenia will need much longer than two years to reach the level of at least the pre-crisis year 2008.