Armenian economy sets new anti-records "Country of stones" at fatal line

Armenia is facing an economic collapse. While managing not to reach a full default, the country's economy is still on the brink of the abyss. The Armenian public debt has recently set a new anti-record for the CIS countries, however, Yerevan still stubbornly refuses from reaching full economic integration with its neighbouring countries in the region.

"Armenia has become the absolute leader in terms of public debt among the countries of the South Caucasus," energy sector expert Vahe Davtyan said on his Telegram channel. The expert noted that Georgia's public debt reached $8 billion, GDP - $16 billion, Azerbaijan's public debt - $8.6 billion, GDP - $43 billion, while Armenia's public debt reaches $10 billion, GDP - $12.6 billion.

Armenia’s public debt reached $9.226 billion as of late 2021, having increased by $1.257 billion or 15.8 per cent over the year. According to Armenian economists' opinion, the public debt has increased both through internal and external borrowing in 2021. If Armenia's external debt has increased by almost twice over the past ten years, then the internal debt has increased by five times. As a result, Armenia is in debt. It is often either a completely losing investor or has big failures in profitability during its trading activity and repays loan fees late.

Being in regional isolation for 30 years, Armenia received a crushing blow, overestimating its economic capabilities in the war with Azerbaijan.

The Armenian economy collapsed by more than 7.6 per cent amid COVID-19 pandemic and the defeat in the war for Karabakh region in 2020. The situation continues deteriorating. Yerevan has been unable to improve these figures.

In principle, the situation with Armenia's external debt is as follows. The country borrows to pay off the previous debt. The Armenian experts explain that the Armenian government periodically borrows from foreign countries and organisations to cover the budgeted expenditures, however, tax deductions and other incoming amounts are not enough to pay it off. The funds are often borrowed to cover the debts because of the periodic social and economic shock situations. 

Thus, the Armenian Statistical Committee published detailed data on July 6, 2022 on the social and economic situation in the country over the past five months of 2022. The Armenian experts noted that proceeding from this data, one of the few industrial sectors providing the state budget with funds - mining sector, is disappearing.

Armenia complains that while Armenian Prime Minister Nikol Pashinyan from month to month proudly declares at a governmental meeting that the plan for revenues to the state budget has been also overfulfilled through additional taxation of the mining sector, this industry is actually cornered. Thus, according to the latest data of the Armenian Statistical Committee, the mining industry decreased by more than 12 per cent over five months, compared to the same period of last year.

Even the trade turnover with Türkiye reached zero as a result of the Armenian government’s clumsy policy.
There was a slight trade turnover with Türkiye, however, after the 44-day second Karabakh war, Yerevan decided to ban the import of Turkish goods to the Armenian markets.

The ban came into force on January 1, 2021 and was justified by the fact that Türkiye allegedly took part in the 44-day war. However, this veto lasted only a year. Then, after its abolition, corruption cases were obvious. It turns out that after the embargo was introduced and lifted, Turkish imports generally disappeared from the state accounting.If earlier (before the ban was introduced) information on the volumes of mutual trade, exports and imports between Armenia and Türkiye was available to the general public, now it is hidden.

Thus, proceeding from the National Statistical Committee's reports on foreign and mutual trade until November 2020, Türkiye still appeared in the list of countries with which Armenia trades. For example, the import volume of Turkish goods to Armenia reached more than $178 million, while the export of Armenian goods to Türkiye - $494,000 from January through October 2020. The meager contribution of Armenian exports is evident.

Meanwhile, the population is rapidly impoverished, utility costs are growing too fast. Gas prices have increased for the population since April 1, 2022, the price increased by 4.7 drams ($0.011) and amounted to 143.7 drams ($0.35) per 1 cubic metre. The price increased up to about $10 per 1,000 cubic metres for other categories of consumers.

Greenhouses should pay $233.9, this is about $10 more, which is a disaster for local farmers. Therefore, such a decision made by the government was greatly critisised in the Armenian social networks. The new prices have a negative impact on greenhouses. The fact is that gas makes up 60-70 per cent of the cost of agricultural production. As a result, the increase in gas prices in Armenia is already leading to a sharp rise in price, not to mention the fact that manufacturers faced a big problem in its sale. The processing products were mainly sold to Russia. It was unprofitable to sell Armenian goods there due to the slowdown in economic processes and the decrease in the solvency of consumers.

Rising gas prices exacerbated this problem. According to the Armenian experts’ opinion, the constant increase in gas prices will affect various sectors of the country's economy. The heavy blow caused by the increase in gas tariffs will affect society in many spheres.

The restoration of trade ties and transport ties not only with Türkiye, but also with Azerbaijan can make a significant contribution to Armenia’s development, which on its own is unable to get out of the crises that have been going on since the 1990s. The opening of the Zangazur corridor is of particular importance in this issue. If this route is fully used, Armenia will be able to take advantage of all the advantages of trade and communication that Türkiye and Azerbaijan have today. However, Yerevan continues persisting, evading integration and experiment on itself, and in particular, on the population, to survive in extreme conditions. There is every chance to cross the fatal line, from where it will be impossible to win back.