Recently RA Prime Minister Tigran Sargsyan has announced that he envisages three scenarios of developments for the economy and the most optimistic one of all is supposed to be the downturn of GDP to 9,5%. He also admitted the possibility of 16% or even 20% decline of GDP.

News.am interviewed Ara Nranyan, a National Assembly deputy from Armenian Revolutionary Federation (ARF), an economist.

Mr. Nranyan, how do you evaluate the highlighted 3 scenarios by RA PM on annual economic decline? Which option is more realistic among all and why?

Probably these figures are even greater for Armenia and in developed countries the economic decline is lower. On the other hand the decline of Armenian economy is natural because of inefficient and improper economic structure and this crisis revealed the gaps in our economy.

The figure indicating decline it’s really high and I do not think that GDP fall would be less than 10%. I am more interested to know what measures the government is going to take in case of each scenario.

Some optimistic forecasts are voiced for the next year, but I do not agree with them either. The year 2010 might be even more difficult for Armenia as issues on providing economic growth are still pending. Our government hopes that if holding up, the world economic crisis will be recovered and have a positive impact on Armenia. But instead of waiting, we have to make structural changes.

Does this mean that you consider economic downturn will neither reach 20% nor exceed 10%?

I do not exclude the decline up to 20%, as the growth in Armenian economy is provided by construction and mining industries, while today they endure recession. Both spheres provided export and dollar influx, whereas private transfers enabled to finance the trade deficit. Today there is no positive progress in either of industries: prices on mining industry raw materials are too low, same for construction. Thus, we offer structural changes as the only way out to regain the situation.

Sargsyan also informed that in current situation, budget expenditures are not to be pruned, but it cover the budget deficit attempting to reach 7.5%. To your mind, is this the best option?

ARF already criticized the policy of decreasing expenditures as this will deepen the internal economic crisis. The latter declined the consumer demand and if the government does not meet the budget expenses, this will decrease dramatically the consumer demand. And I am glad that the government came to this conclusion a few months later after several statements we had made.

This is done at the expense of the external credit funds and in this case RA foreign debt will reach incredible amounts, isn’t this risky?

The issue has two sides. On the one hand it is required to attract external credit funds and make structural changes in our economy, on the other hand if do so only to cover the budget deficit, we will face difficulties. The thing is how efficiently we will spend those funds.

We have mentioned repeatedly, that import should be replaced with local production. However, what did we do for the producers or creation of workplaces. Almost nothing. I mean foreign funds should be allocated to the fields providing economic growth and employment.

The major share of the International Monetary Fund (IMF) credits for Armenia will be directed to the CB reserve stock (at the beginning of this year was spent to retain the currency rate). Is this policy within the frames of your mentioned efficient expenditures?

Unfortunately the banking system is considered the basis of our policy and it seems that the whole economy works for it whereas the main function of the banking system should be the provision of normal activity of the economy.

Briefly, it is required to think of how to develop our economy and not only focus on banking system.