Hrant Bagratyan: Talk of a 'Revolutionary' Economic Model is Out of the Question

The former Prime Minister of Armenia, Hrant Bagratyan, writes on his Facebook page: "One step forward, three steps back... The macroeconomic figures for January-August 2019 have been published. The lack of progress indicates the stagnation of the economy; there can be no talk of any 'revolutionary' economic model.

Macroeconomic indicators:

As of the first eight months of 2019, there is no GDP indicator (since 2019, agricultural data is published quarterly). The GDP growth rate was 7.0% instead of 6.8% for the first half of the year. However, there is a bluff here; in reality, the figure has not grown by even 0.2%. The GDP for July has been adjusted from 8.1% to 8.3%. Therefore, in reality, there has been a decline in the growth rate of GDP from January to August.

Regarding real economic growth, the GDP was 7.1 in the first quarter, 6.5 in the first half, and will further decrease to a range of 5.8-6.2% in nine months, considering the absence of growth in agriculture. Removing the toxic growth (from gambling, car sales, mining), we end up with around 3-3.5%. This means that it has grown as much as the world economy and is significantly lower than during the Soviet era, when we were supposedly satisfied with it.

Sectoral Indicators:

The growth has mainly been recorded due to tourism, manufacturing industries, mining, gambling, and car sales. Among these, only the first two are positive. The incidents related to Russian tourism in Georgia have significantly helped the Armenian economy. Moreover, there is no noticeable growth in the IT sector (in middle-tier countries, IT sector growth exceeds average economic growth by seven times). The 15% growth in mining is linked to Amulsar. Seeing the complexities here, other miners have significantly increased their extraction volumes. Currently, there is a real plundering of mines taking place. It has long been stated that ore is exported at low prices to offshore companies and then sold at high prices to the final buyer. There's been a call for regulation, but there hasn’t been any. Since the highest ore extraction is happening now, it appears that the most significant corruption and plundering is occurring now, 'after the revolution.' Additionally, add to this the absence of quotas for mining extraction and the established environmental norms for every mine (under such conditions, for example, conducting an environmental impact assessment for Amulsar is a waste of budget resources). It's been said. The result is zero.

Statistics in several sectors are evidently fabricated. For instance, GDP has grown by 7%, while cargo transportation has decreased by 54%. Within just one year, the freight transportation in the economy has fallen by more than twice. This is no longer economics; it falls into the genre of literary fiction. One more year like this, and Armenia will be the first country in the world where transport is unnecessary. Construction has increased by 4.4%, while the production of commodity concrete has decreased by 12%. That is, in one year, the unit production of concrete in construction has dropped by 16.4%. Incidentally, electricity production has also decreased by 3.5%. This means that the electricity generation per unit of GDP has decreased by 10%. I don't believe it.

Another question is the growth of brandy production by 44.5%. Analysis shows that in more than 70% of cases, this growth was recorded in factories that do not produce distillate, but rather rectified spirits. In other words, spirit colored with up to 10-15% of grape distillate is exported to the Russian Federation. One day, when our brandy exports to Russia are suspended, don't beat the patriotic drums.

Inflation:

Unfortunately, inflation has been 1.8%. Global experience shows that serious economic growth is impossible under such inflation. The analysis also indicates that this low inflation, which government members mistakenly present as a success, is actually merely a monetary phenomenon. Firstly, state budget expenditures have only increased by 7.7% compared to the same period in 2018 (897 and 833 billion drams, respectively). At the same time, revenues have increased by 21.7% (990 and 812 billion drams). Secondly, the Central Bank is continuously squeezing the money supply. Since the beginning of the year, the money supply has been reduced by more than 70 billion drams.

Budget:

The pace of revenue growth in the budget has significantly decreased. Do you remember when in July the government announced that revenues from January to June 2019 surpassed the same figure in 2018 by 25.1%? We said to relax; it will soon drop. Indeed, from January to August, compared to the last eight months of last year, state budget revenues have only increased by 21.7%. This figure will also decrease soon. In terms of tax collection, the State Revenue Committee has performed relatively well. But the reserves are exhausted. The growth rate will continue to drop until the end of the year.

Employment:

This sector has been treated especially poorly by the State Employment Agency. Do you remember when during the year the government announced the creation of 51,000 jobs? I retorted, what are you talking about? According to your own State Employment Agency data, unemployment increased by 6.7% or 16,000 people compared to the corresponding period in 2018 in the first quarter of 2019. And lo, in the second quarter, the number of unemployed sharply decreases by 46,400 individuals. In a 3-million state, reducing unemployment by 15,500 people in a month... In the best case in the USA, 130-150,000 new jobs can be created monthly, and in Russia, 8,000 (if economic growth exists). It’s shameful. When the government was reappointed in May 2018, we warned that the agenda was not noble.

Data on investments, emigration, comparably priced exports, capital outflows from the country, etc., have not been published at all (if there were improvements, they would have published them immediately). There has been a sharp (6.8%) increase in crime. Crimes against property have increased by 19.4%. Homicides have increased by 18%.”