State of #Armenian Economy & 2022 Budget
Thread summary of @groong convo with Vardan Aramyan, Former Minister of Finance of Armenia
Topics:
* 2022 budget & growth
* Growth sectors
* Inflation
* Corridor economics
* $2.6B in EU aid
* #Artsakh
1/14
1. 2022 BUDGET & GROWTH
Q: Assessment of 2022 budget?
A:
- Look at structure and pace of growth & compare it with others
- Good news: +4.4% growth in econ activity (first 9 months)
- Bad news: Does not compensate for last year's downturn (-7.4%)
2/14
Q: Are we out of recovery?
A: Not yet:
- Recovery pace is slow
- Structure is worrisome with construction and services leading
Aramyan talks about importance of credibility in communicating with economic actors.
Potential for repeat of 2000s.
3/14
Q: Is structure of growth similar to global trends?
A: Both local and global effects which need to be looked in separate time-frames: (a) post-2018 and (b) post-crisis.
In AM, one big local effect was the "biased expectations" after events of 2018.
4/14
Q: What if growth estimate is inflated?
A:
- Real growth may be around 5%
- If growth target is not achieved, expenditures may need to be cut
- Sustained high growth requires deep & aggressive reform
- Dangers of populism are highlighted
5/14
Q: Why did the IMF underestimate Armenian growth initially?
A:
- Initial low estimate result of poor crisis management policy (not providing enough liquidity)
- Upgrade in expected growth is a result of worldwide better-than-expected growth.
6/14
2. GROWTH SECTORS
Q: What are major factors in budget driving growth?
A: Budget predicts that industry/agriculture will lead overall cross-sector growth, however, not enough evidence/justification for it.
7/14
Q: Are prices for Copper/Aluminum extremely inflated? And could this affect real growth?
A: Potentially prices may come down, but not drastically.
8/14
3. INFLATION
Q: How much of the growth factors in the inflation that we’re currently seeing?
A: Question needs to be rephrased. “Will high inflation will harm future economic growth for 2022”? There is a risk for that.
9/14
Q: How will inflation affect salaries, income inequality, poverty, and other socioeconomic markers?
A:
- Inflation will affect the socially vulnerable and poverty rate will go up.
- The issue is how to fight this long-term, not in 1 yr.
10/14
4. CORRIDOR
Q: Can we expect "qualitative boost" to economy with unblocking of corridors?
A: Requires more explanation how doubling Armenia's road to Russia would provide this boost. Additionally, there's risk of Turkish domination of AM economy.
11/14
5. $2.6B EU AID
Q: Is this grant or credit? Can AM absorb it if all funding materializes?
A: Not enough info yet on breakdown. Depends on skills of AM negotiators. If we manage to convince to use the money on Syunik, then it will be good.
12/14
6. ARTSAKH
Q: Have you visited Artsakh recently? What is the situation there for Vallex companies operating in Artsakh?
A: Natural uncertainty among population as well as businesses given results of war.
13/14
THE END
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14/14
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