YEREVAN, JULY 19, ARMENPRESS. Labor productivity has been increasing in Armenia but the pace lags behind the world, according to the National Competitiveness Report of Armenia 2017, reports Armenpress.

“Staying competitive requires a rise in productivity that is higher than that of competitors. This is a constant race. In the last decade, Gross Value Added (GVA) per employee/ capita in Armenia recorded a noticeable increase. In the period of 2010-2015, GVA per employee increased by around USD 1,700 (2010 constant USD) at 3% Compound Average Growth Rate (CAGR). CAGR of GVA per capita is even higher at 5% mostly due to the decreasing population rate”, the report said.

According to the report, based on the 2015 data, Armenia is ranked 110^th in the world in the GDP per person employed (PPP, constant 2011 international $).

“Labor productivity has been the key determinant of Armenia’s GVA per capita increase and needs further enhancement through tradable sectors. In the period of 2005-2014, GVA per capita in Armenia increased by more than half, reaching around USD 3,420. The decomposition of the performance demonstrates that labor productivity (value added per employee) accounts for two-thirds of the growth. Employment growth accounts for around one-quarter, and increased labor force participation accounts for only 8%”, according to the report.

The report says further enhancement of productivity should be led by predominantly tradable sectors.

“This productivity rise will positively impact adjacent service sectors. Increased productivity will eventually disseminate to the non-tradable industries. Competition in the labor market will act as the key gear mechanism through rising wages in tradable industries. However, developments in traditional sectors, particularly agriculture, will largely account for the scale and payoff of the transformation within the economy. Productivity increases in these sectors are expected to lead to a certain net loss of jobs in the sector (beyond increased jobs due to expanded output). Opportunities created in other tradable sectors in the economy would need to absorb excess labor from traditional sectors and agriculture. This absorption necessitates significant structural shifts and skills upgrading”, stated in the report.