Friday, 25 December 2009
FY 2009 Results Summed Up by the Head of Government
Republic of Armenia Prime Minister Tigran Sargsyan met with mass media representatives in the government’s press center to sum up economic performance for 2009.
Tigran Sargsyan:
It will take some time before we can draw up more accurate estimates of 2009, take a retrospective glance at the challenges faced up during the year and trace back those basic processes which led to the current situation. Of course, we will be more objective in our findings after a while.
It seems to be obvious that the year 2009 was full of threats and challenges. Our still young statehood demonstrated that it could cope with serious hardships like the ones faced this year with least possible losses. We all understood that Armenia could hardly be spared by the global financial and economic crisis. In this respect, I have already presented the macroeconomic analysis of 2009 in the government’s report submitted to the National Assembly quite recently.
The global crisis revealed our weaknesses. At the same time, it taught us to be more courageous in pushing ahead with reform, diversifying the economy, providing equal conditions for economic competition in an effort to attract more private investment from abroad. We have no other choice as the economy is still fragile, and much has to be done yet in this respect.
Now, let us see if there were any alternatives to the strategy embraced by the government? Unfortunately, we were unable to avoid criticism. In the meantime, our continued cooperation with the World Bank, the IMF and other international institutions may prove that we are on the right path.
In particular, infrastructure spending has been increased dramatically. As a result, the State was able to spend about AMD 900bn in 2009 against last year’s 810 billion. The national economy was on the upgrade in 2008, in sharp contrast with this year’s recorded 15% fall. Nevertheless, we managed to take up expenditure by AMD 100bn in 2010. This indeed was a strong boost for a number of sectors and augmented our citizens’ immunity against crisis thanks to a 16% rise in pensions and an 11% growth in both public and private sector wages respectively in the year under review. Note that all this was achieved amidst 15% economic downturn. A total of 3000 jobs have been made available in the disaster zone. The ongoing large-scale construction campaign will be maintained in 2010-2011. 415 km-long road sections of both national and local importance have been built in the period under review leading to 1000 new jobs created in this sphere alone. 300 km-long irrigation pipelines have been installed and additional 500 km-long water-mains are scheduled for construction next year. This means we will continue expanding the infrastructures and providing new jobs.
As a whole, 8000 more unemployed were registered in 2009 amidst continued unprecedented downturn. 40% of the fall came on construction which used to be financed from the proceeds of investments coming from Russia and the USA.
Yet, we had a number of achievements against the background of these failures. In particular, there was a 3.5% increase in the sphere of information technologies chiefly thanks to two factors. Firstly, you know that we have an IT council involving the heads of leading IT enterprises. They joined us in operating serious improvements in 2008-2009.
The IT sector is a priority to us from the perspective of economic diversification, and I am pleased to state that it was able to stand the test of the crisis and even strengthen its position. As a result, internet coverage nationwide is due to reach the mark of 2.1 per second by yearend while it was only 1 GB per second earlier this year.
I would make a point of about halved web access fees in 2009 by noting that this trend will be upheld in 2010. Orange the French operator came into Armenia’s telecommunications market to enhance competition in this sphere. As a result, the number of domestic users increased twofold from 75,000 to 175,000. We have as much as 700,000 GPRS users at this point of time. The above may testify that in 2009 we managed to create all the necessary pre-conditions for the IT sector to become a key driving force for the train of economy. Currently the domestic IT sector has greater turnover and better staffing than the mining industry.
Improving the small and medium-size business conditions was our second focus. 32,000 entities could benefit from a VAT holiday in 2009. The tax threshold was raised from AMD 3mn to AMD 58mn. As a result, 24 billion drams were economized by economic entities. This allowed thousands of small businessmen to gain extra immunity versus the crisis. Over 20 billion drams of overpaid duties were refunded to private entities during the year to help them withstand the crisis.
Notwithstanding the failures and shortcomings identified during the implementation stage, we proved to have chosen the right path of reform. As a result, we could meet our social commitments in full without getting into extra indebtedness and avoiding those adverse consequences encountered in the quasi-totality of CIS countries.
Another important lesson taught by the crisis is that the banking sector was not prepared to meet the global downturn. Armenia proved to be the only country to refrain from supporting the trade banks which parried the threats on their own through adequate capitalization and liquidity reserves. Moreover, household savings grew by more than 30% in the banking sector during 2009. This is an evidence of increased public confidence in the banking sector.
It may rather seem strange that our citizens’ savings continued upwards amid crisis, but this has an explanation and is not the specificity of Armenia. Caught up in a crisis, people worldwide become more frugal and tighten their belts in preparation for pessimistic scenarios. This means that our citizens’ expectations are crucial in terms of shaping a social behavior. Should there be any changes in relevant expectations, the individuals and entities will step up on spending generating jobs and economic growth. Therefore, we must join forces to provide the public with accurate information so that they could make the right decisions.
