Newspaper debunks authorities' claims about diversification of Armenian economy Re-export is key

According to an article in the Armenian daily "168.jam", some officials have been claiming that Armenia has diversified its economy to avoid any potential negative impacts in case of a change in foreign policy. However, this claim is untrue and is being made in an attempt to ease public concerns regarding a shift in political direction.

Caliber.Az reports that according to the newspaper, there has been no meaningful diversification in the Armenian economy, which is not surprising given that the export sector has decreased in recent years. While some countries have increased their share of our foreign trade, this has happened primarily through re-exports and does not indicate true diversification.

The article went on to say that the export sector of Armenia's economy produces far less than the volume of exports. For instance, in January of this year, official data showed that the output of our entire industry was worth around $500-510 million, whereas the total value of exported goods was $934 million. Even if all output was exported, we still could not achieve such high levels of exports. Furthermore, we don't even know how much of our domestic production is consumed within the country.

"Despite these limitations, we have seen a significant increase in exports to certain countries, which has resulted in their increased weight in Armenia's foreign trade. However, this increase is due to re-exports rather than true diversification of our economy's external markets," the newspaper says.

"It is not surprising that more than half of the $934 million in exports recorded in January was accounted for by just one commodity group. We are talking about precious stones and metals. Exports of these goods totalled $587 million in January. More than the output of the entire Armenian industry in that month. The export of precious stones and metals has increased 9 times compared to last year. Last year it was only $65 million.

The jump, which was independent of the economy, brought the weight of gems and precious metals in exports to almost 63 per cent. All other sectors of the economy accounted for only 37 per cent of exports, or just under $347 million," the 168.jam notes.

There is also a large re-export component. Exports of many domestically produced goods not only did not increase but declined, in the context of the 2.1-fold increase in exports recorded at the beginning of the year. Meanwhile, some of these products or groups of products have always had a key weight in Armenia's exports. This applies in particular to manufacturing industries such as the food industry.

Armenia's exports of finished food products fell by almost 22 per cent at the beginning of the year. Last year, $63 million worth of goods were exported, this year - $49 million. Exports of animal products fell by more than 32 per cent, chemicals and related industries by 39 per cent, plastics by 39 per cent, and so on. Exports of mineral products also dropped by more than 19 per cent.

Exports of precious stones and metals have grown rapidly, leading to an increase in the polarization of exports and dependence on this one type of product. The growth in exports of this group of goods alone exceeds the growth in total exports. Precious stones and metals exports increased by $522 million over the previous year, while total exports increased by $485 million. This means that 63 per cent of exports were solely dependent on this group of goods. It is a hazardous phenomenon for foreign trade because if the road to their re-exportation were suddenly closed, exports would be overturned.

The weight of some countries in Armenia's foreign trade has increased, mainly due to such phenomena. The United Arab Emirates has become the leader in Armenian exports, but this is not diversification. Precious stones and gold were brought from Russia and exported to the Emirates, leading to an increase in imports from Russia to Armenia several times.

Most of these imports are re-exports, primarily precious stones and metals. If before last year, the growth of exports was dominated by the same re-exports, the trend has changed. The growth of exports to Russia has practically stopped, and instead, imports have started to rise sharply, mainly due to the sanctions imposed on Russia. Armenia has become a transit country for Russian goods in some directions.

These phenomena have nothing to do with the diversification of the Armenian economy. Instead, they are trying to deceive the public, which tomorrow will bear all the economic and social consequences of the change in the foreign policy vector, as the article states.