The problem is that there are no projects in Armenia that can attract the attention of large institutional investors
One should not expect the growth of the Armenian economy to a level when it will be able to cover new loans in the medium term. The source of payments on credit obligations, as before, will be only tax revenues and state revenues, Aza Mihranyan, a leading researcher at the Center for Post-Soviet Studies of the Russian Academy of Sciences, expressed such an opinion to ArmInfo.
"We should take into account the realities, the state budget, the pace of its replenishment and, of course, the level of the tax base. If new loans are taken under state guarantees, but they are not self-sustaining this may lead to deterioration of financial situation and the emergence of a budget imbalance in general. In the context of the observed lack of specific sources of borrowing, specific projects for financing, and most importantly, an understanding of the general situation, an increase in the debt burden is undesirable," she noted.
The situation, according to the expert, is aggravated by the fact that the drivers of economic growth remain the field of information technology, tourism and services. Meanwhile, in her opinion, it is necessary to make every effort to increase the level of productivity in such traditional sectors as agriculture, mining metallurgy and chemical industry.
According to Mihranyan, large-scale investment projects for which large loans could be issued by international, institutional and strategic investors, today simply do not exist in Armenia. Meanwhile, any external borrowing, including from the EAEU country, also requires specific projects. To note, today Armenia demonstrates the best indicator in the countries of the EAEU and even Europe in terms of GDP growth rates. In the first quarter of 2019, it was 7.1%. In the state budget of the Republic of Armenia for 2019, GDP growth of 4.9% is laid, however, according to the updated at the end of June of this year forecast of the Central Bank of Armenia, the range of GDP growth in Armenia for 2019 has been significantly improved - to 5.9-7.4% against the previous 4.6-6.1%. Such a revision of the forecast for GDP growth for 2019 was explained by the Central Bank to higher than expected economic growth in the first quarter (by 7.1% per annum) and a high probability that this trend will continue in subsequent quarters of this year. The CBA explained an increase in the range of projected growth by maintaining high growth rates in the service sector and partly by activating the industrial sector, as well as the expected significant increase in private consumption.
The national debt of Armenia grew in the first half of 2019 only by 0.2%, without actually moving from the level of $ 6.9 billion (3.3 trillion drams). According to the Ministry of Finance of the Republic of Armenia, in its structure, external debt decreased by 1.4% in the first half of the year to $ 5.5 billion (2.6 trillion drams), and domestic, by contrast, grew by 6.3% to $ 1.5 billion (705.1 billion drams). In particular, during the reporting period, the government's external debt decreased by 1% to $ 4.9 billion, while the Central Bank's foreign debt dropped by 4.5% to $ 525 million. Moreover, in the external debt of the Central Bank of Armenia, the share of government guarantees loans was 26% or $ 136.5 million, with a six-month decline of 4.2%.
From external sources, the government attracted loans as of July 1, 2019 in the amount of $ 4.1 billion (with a six-month decline of 0.7%). In particular, the volume of loans attracted from international organizations amounted to $ 3.2 billion at the reporting date (half-year decline by 0.8%), from foreign countries - $ 931.5 million (half-year decline by 0.01%), from commercial banks - $ 21.7 million (half-year decline by 4.4%).