We predict higher economic growth than expected – finance minister
YEREVAN, JANUARY 27, ARMENPRESS. Finance Minister of Armenia Vardan Aramyan gave an interview to ARMENPRESS news agency.
-Mr. Aramyan, recently you presented the results of your ministry’s work carried out in 2017 at the Presidential Palace, and during the prime minister’s visit to the ministry you stated that the annual economic growth for 2017 will be higher from the predicted 4.3%. What are the main factors that contributed to the economic growth last year?
-The first reason is that in November-December the National Statistical Service made some clarifications in the figures of import and capital construction. For instance, the capital construction didn’t include the investments of Amulsar mine, and this led to major clarification. If we predicted that we should have the regular decline in the field of capital construction, this clarification changed the situation. The second is that in 2017 the transfers were more by 14% than in the previous year. Of course, the income of our households increases based on this, and the consumers present demand for goods and services, and this in its turn leads to increase of retail trade. We have also witnessed quite a major increase of wholesale trade. The 26% increase of wholesale trade was combined with a modest increase of retail trade. In this context we see problems with the logic of economics, therefore, we need to make more thorough research and understand what is the problem.
In the first half of the year we also had such a situation when the economy absorbed unemployment: in the first half of 2017, compared to 2016, nearly 40.000 jobs were created, and we need to look at the second half of the year and understand the development. Factor analysis will enable to understand the qualitative indicators in addition to the quantitative figures of the economic growth.
However, all this environment should be assessed positively, in a sense that in any case we have high economic activity, and I think the economic growth as well will record a high rate after some clarifications. Of course, this doesn’t mean that in the future years we already can state that we will have 6% or 7% economic growth. In order to have a qualitative and inclusive economic growth, we still need to take steps.
-The World Bank has predicted 3.8% economic growth for Armenia in 2018 taking into account several external factors, such as the growth of transfers, the increase in prices of copper in the international market and tec. If we consider that the growth depends on external factors, how their change can affect the growth?
-Yes, the external factors play a role and it’s not small, but it is not complete since quite major actions have been carried out in the domestic economy. We should take into account that during the year many companies received an opportunity to postpone the Value Added Tax (VAT). I don’t remember any Government session during which Suren Karayan didn’t report about the plans to postpone VAT for any program for three years. These are investment programs, these are programs which today and in the medium-term will contribute to the economic activity. Moreover, we have eliminated the entry barriers in the market, took steps aimed at forming positive expectations among the economic entities so that they will make investments more confidently. We made efforts to keep stable the macroeconomic environment so that the businessman would not be restricted while making new investments. If there are doubts among the investors that the government is unable to keep the macro environment within the scope of governance, no matter how much efforts you make at the micro level, you are doomed to failure. That’s why for us the first task at the macro level is to ensure sustainable environment, and we succeeded. I think, we will continue the same trends in 2018.
-Nevertheless, what are the three main achievements of 2017 and the issues that are still unresolved?
-In late 2016 what we promised to our people and businessmen, we did. We promised that in 2017 we should take two groups of actions. Among the important principles of the budget is the debt-GDP rate stabilization. You remember that in 2013-2016 we were under the negative shock coming from the external sector, and in 2015-2016 the government’s debt-GDP figure increased by nearly 13% so that to be able to counter that negative shock. We were no longer able to increase this figure as it led to service costs. That’s why it was necessary to gradually stabilize the situation and decrease this figure, that the debt service costs in the common expenditures to stop at some moment and then to decrease. Of course, this year we have increase of service costs in the overall costs. In this sense it’s quite difficult to plan an aggressive increase of costs for the next year, this is quite dangerous, but, of course, in the medium-term it cannot take place.
The second achievement is the stabilization of macroeconomic environment, and Fitch Ratings also reacted to those, which of course, didn’t change our ranking, but changed the prospect from stable to positive.
The third key achievement was that we will have higher economic growth than expected after summing up the results of the year, approximately in March.
The problems we still have is the increase of the overall economy’s potential. Every year we have a potential to produce goods and services of any quantity. Moreover, in order to be able to produce effectively, we need to compete with the regional countries which produce similar goods and services. Here the problem is raising our potential. This is possible through the increase of capital productivity, on the one hand, and labor force qualification, on the other hand. Here, the role of the state is not only to improve the business environment at the micro level, but also to create developed infrastructures. In order to increase the overall potential the state should make permanent investments in infrastructures and contribute to reacting to this by the private sector in the form of investments.
The second part is the labor force. Here we need to solve a serious issue, carry out works so that each employee can compete with the world. If the world moves on the digitization path, new technologies, we also need to walk in line with these new developments. We need to make efforts at the state level to achieve competitiveness. The talk doesn’t concern only the private sector, the competitiveness is in the governance system. That’s why we try to strengthen the institute of our internal audit since the quality of the production of the businessman depends on the quality of service provided by us. The vision we want to develop is that we need to develop the potential of our economic growth.
Interview by Ani Nazaryan
Full interview is available in Armenian.