March 01
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Hrant Bagratyan, former Prime Minister of the Republic of Armenia (RA) and an economist by profession, has posted on his Facebook page his analysis of the country’s macroeconomic data for January-August 2019. He wrote as follows:

One step forward, three steps back ...

The macroeconomic numbers for January-August 2019 have been publicized. The lack of progress attests to the stagnation of the economy; there can be no talk whatsoever of a “revolutionary” economic model.

Macroeconomic Indicators

GDP-EAI [Economic Activity Index]: There is no GDP indicator for the 8 months of 2019 (since 2019, the agriculture data are publicized quarterly). The EAI indicator made up 7.0% compared to 6.8[%] of January, June. Here, however, there is a bluff. In fact, the indicator has not increased by even 0.2%. They have “adjusted” the July EAI and made it 8.3% from 8.1[%]. So, in fact, in January-August a drop in the EAI growth rate was recorded. As for real economic growth, the GDP was 7.1[%] in the first quarter, 6.5[%] in the first half, and in the 9 months, given the absence of growth in agriculture, it will drop further (5.8-6.2% range). And by subtracting the toxic growth (games, car sales, mining) from that, we come out at 3-3.5%; that is, as much as the world economy has grown, and much less than in the days of SS [third President Serzh Sargsyan]; as if we were pleased with it, too.

Branch Indicators:

The growth was recorded mainly due to tourism, processing industry, mining, games, and car sales. Only the first 2 of these are positive. The cases linked to Russian tourism in Georgia greatly helped the RA economy. Moreover, there is no noticeable growth in the IT sector (the growth of the IT sector in average-level countries surpasses the average indicator for the growth rate of the economy 7 times). 15% growth in mining is due to Amulsar [gold mine]. Seeing the complexities here, other mine owners have dramatically increased their production volumes. At present, a real looting of the mines is taking place. NP [Prime Minister Nikol Pashinyan] has long been told that ore is exported offshore at a low price, whereas from there is sold to the final buyer at a high price. It was said that fix [it]. It’s not fixed. And since most ore is being extracted now, it turns out that the biggest corruption and looting [in Armenia] is now, after the “revolution.” Add to this the absence of ore mining quotas and approved environmental standards in the case of each mine (in these circumstances, for example, doing an EIA [Environmental Impact Assessment] on Amulsar is a waste of budget funds). It has been said. The result is 0.

The statistics in several domains are clearly falsified. Thus, the EAI has grown by 7%, whereas cargo transportation has decreased by 54%. In just one year the load capacity of the economy has dropped more than 2 times. This is no longer economics; it is a genre of literary fiction. Another year like this, and the RA will be the first state in the world where transportation is not needed. Or, construction has increased by 4.4%, whereas making of product concrete has decreased by 12%; that is, in the one year the unit construction concrete making has dropped by 16.4%. By the way, electricity production has decreased by 3.5%; that is, the electricity production of the unit GDP has decreased by 10%. I do not believe. The brandy production growth—44.5%—is a separate matter. The analysis shows that in more than 70% of the cases, that growth was recorded in factories that produce rectified alcohol, rather than distillates; that is, color vodka with an added up to 10-15% distillate of grape is exported to the RF [Russian Federation]. One day when our brandy export to the RF is suspended, don’t drum the patriotic stupors.


Unfortunately, inflation was 1.8%. The world track-record shows that a major economic growth is not possible under such inflation. And the analysis attests that this low inflation, which the government members mistakenly present as a success, is in fact purely monetarist phenomenon. First, state budget expenditures are a mere 7.7% more than expenditures for the same period in 2018 (897 and 833 billion drams, respectively). At the same time, revenues are more by 21.7% (990 billion and 812 billion drams). Second, the CB [Central Bank] constantly squeezes the money base. Since the beginning of the year, the money base has been reduced by more than 70 billion drams.


The budget revenue growth rate has substantially reduced. You recall when NP announced in July that the revenues for January-June 2019 are exceeding the similar of 2018 by 25.1%. We said [to you] relax; soon it will go down. Indeed, in January-August, state budget revenues have increased by only 21.7% as compared to the 8 months of last year. In the near future this number also will decrease. The SRC [State Revenue Committee] has done a relatively good job in terms of tax collection. But the reserves are depleted. By the end of the year, the rate of growth will continue to decline.


The NSC [National Statistical Committee] has manifested a special attitude towards this domain. You recall, during the year NP announced that 51 th[ousand] jobs were created. And I countered that what are you saying? According to your NSC data, unemployment in the 1st quarter of 2019 has increased by 6.7%, or by 16 th[ousand] people, in the corresponding period of 2018. And the number of unemployed in the 2nd quarter is sharply dropping by 46.4 th[ousand] people. Decrease of 15.5 th[ousand] unemployed per month in a 3mn [population] state ... In the US, at best, 130-150 th[ousand] new jobs are possible to be created per month, whereas in the RF—8 th[ousand] (if there is economic growth). It's a shame. When SM was reappointed in May 2018, we warned that NP’s objective was not good.

The figures on investment, emigration, comparable export prices, export of capital from the country, etc. have not been publicized at all (if there had been improvement, they would have publicized in a hurry).

Crime [in Armenia] has increased dramatically (6.8%). Crimes against property have increased by 19.4%. And the murders—by 18%.

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