Can the State Afford to Raise Pensions to 70,000 Dram and Minimum Wages to 100,000 Dram? - Tunyan

Babken Tunyan, a member of the National Assembly from the Civil Contract faction, spoke with Lragir.am. Mr. Tunyan, the economic activity indicator for 2021 was 5.8 percent, but the government expected a larger growth based on revised indicators. How do you assess the existing situation in the economy?

If we look at what was expected, we initially forecasted a lower growth in the 2021 budget—around 3 percent. Later, during the year, the forecast was revised, targeting a growth of 6.5 percent. Now, 5.8 percent is the indicator of economic activity, not economic growth. It is assumed that economic growth will also be in the same range. We can say that this is an indicator close to the adjusted forecast, which is normal—it’s neither good nor bad. And if there hadn’t been a decline in the agricultural sector, we might have had a figure that was 1-2 percentage points higher.

We can say that the economy is in a recovery process after the crisis. We cannot say that we have fully recovered because the pace of decline was higher than this growth. However, next year we will be able to fully transition to recovery and exceed the pre-crisis situation.

The budget set a target for inflation of 4+-1.5 percent, but in 2021 the official consumer price index was 7.2 percent. This indicates a significant deviation; how should we mitigate this?

You are right; our inflation target is set within the range of 2.5-5 percent. Indeed, in a market economy, it is impossible to control the inflation environment very precisely. Especially regarding imported goods, we have an increase in prices, which will have its effect in Armenia. There are also some constraints here; if the Central Bank applies excessively strict measures to curb inflation, it will affect the cost of loans and the volume of business financing. I want to emphasize that this targeting of 4+-1.5 percent is not typically done for one year but rather over a three-year period. One year we may have inflation above that level, the next year lower or even deflation. Now the Central Bank assures that inflation will return to its normal and natural course within that planned range. I understand that for people buying goods and services, this does not alleviate their concerns, but it should also be understood that this inflation is due to objective reasons.

Opposition lawmakers are already claiming that the economic indicators for 2021 actually show a process of impoverishment in the country. This is also visible in everyday life.

Yes, in this situation we also note that if prices are rising while people's incomes do not increase, it naturally contributes to the growth of poverty. But what are the solutions? In our opinion, the solution is to mitigate and ultimately prevent the impoverishment process through balanced economic growth that increases incomes. If our opposition colleagues mean that pensions and salaries should be raised immediately, we are open to discussions, but there must be economic justifications.

You say, what are the solutions, but the government is precisely there to provide solutions. Is there a need for urgent programs and actions in this situation?

Urgent actions are taking place one way or another. Aside from pensions, there is also a benefit system, and the minimum pension amount is going to increase. Alongside the increase in the prices of various goods, for example, it may be the price of gas or another type of good or service, preferential systems for socially vulnerable groups continue to operate. But if we stand here today and say that pensions should be set at 70,000 dram or the minimum wage at 100,000 dram, it sounds very pleasant, but it must be considered whether the state has the capacity for this. And when our opposition colleagues make such proposals, in my opinion, the main goal is for those proposals to be rejected, allowing them to gain certain political dividends. If we speak on a professional level, they too have been in power before and know that raising pensions all at once is not so easy. Secondly, this can lead to much worse consequences if your economy does not have the capacity for it.