Armenian News Network / Groong
Hello, and welcome to the
Armenian News Network, Groong, Week
in Review. This show was recorded on November 21, 2022.
Here are the major topics
we’ll touch on today:
●
How is Armenia’s Economy Doing?
●
Armenia-Azerbaijan Negotiations
●
French Senate Slams Azerbaijani Occupation of
Armenia
●
The Opposition Returns to Parliament
To talk about these issues, we have with us:
Hrant Mikaelian,
a political scientist and multidisciplinary researcher in social sciences based
in Yerevan. He is also a senior researcher at the Caucasus Institute.
Armenia’s economy is “raging forward”,
according
to Pashinyan. Based on statistics from the first 9 months of
2022, Armenia recorded a 14.1%
growth in the economy, which is ahead of the 10%
inflation the country is predicted to experience in 2022. Pashinyan also touted
143,000
new jobs created in Armenia since he took power in 2018,
and a 75.1%
increase in state budget revenues from 2018 to his projected 2023 budget.
So he says that Armenia has
overcome the economic problems of the Covid pandemic and the war of 2020.
●
What is not to like here?
According to minister of finance Tigran
Khachatryan, they think that Armenia’s real potential for growth in 2023 is
around 7%.
I’m going to read between the lines here and say that if that potential is
similar to this year, then there’s a 7% artificial boost that’s flowing into
the economy as an artifice of the war in Ukraine. As a result of the influx of long,
and short-term immigrants or tourists, their businesses, bank accounts, their
direct expenditure in Armenia’s economy, it has led to hyper-inflation in some
areas such as real estate, and common consumer basket goods.
●
Is this sustainable? What are the risks?
The Central Bank of Armenia (CBA) has continued
raising the refi rate, which now stands at 10.5% in Armenia. They seek
to bring inflation down to around 4% in 2023, from the current 9-10% levels.
Pashinyan believes
that while inflation is real, it’s more of a global phenomenon, instead of
being particular to the Armenian economy. So his
government wants to see lower rates in order to spur on economic activity.
●
What’s your assessment of this classic struggle
between a government and its central bank? Is the CBA acting efficiently under
the current circumstances?
●
Are Armenia’s fiscal and monetary policies
aligned and working synergistically? Basically, is the government helping the
CBA in fighting inflation?
Despite all the good news
announced, the Agriculture sector, which is very important in Armenia, was down
0.7%. I’ve seen a lot of complaints by farmers in the
Armenian press about a lack of governmental support for their efforts.
Meanwhile, despite reports
that many IT companies are losing money because of exchange rate fluctuations,
the government is super bullish on the IT sector, claiming
in 3-4 years it will become the largest sector in the Armenian economy,
surpassing the mining industry. It looks like IT companies will receive some
temporary tax-credits to lessen the impact of the appreciation of the Dram. But
these are temporary measures and in the long term, unless the dram depreciates
again, the cost of labor is now significantly higher and makes Armenian IT
companies less competitive globally.
The IT sector is important,
and we all want it to thrive, but it’s not a large part of the labor market in
Armenia, at least today. Meanwhile the Agriculture sector affects a large
segment of the population. So, it seems that in order to shift gears and
modernize the Armenian economy, the government is applying shock treatment to
the people.
●
Are we reading this right? And if so, is the
government supporting its vision with the appropriate infrastructure to support
the modernization?
●
One specific complaint heard frequently is the
low availability of talent. Is anything being done to address this, given that
this is a long-term project?
OK, let’s briefly talk about the 2023 budget that was proposed by the Pashinyan government, and passed by the Pashinyan parliament. The priorities of the budget are:
○ Not clear what they want here, maybe they will increase the number of travel agencies and hotels in Armenia.
As we noted, the government projects 7% economic growth and has proposed a $6.4 billion spending budget, on an estimated budget revenue of $5.6 billion.
We are going to need to dedicate a show some time soon to drilling into this budget to understand it better.
● What stands out for you in this budget?
In the past couple of weeks, the war of words
between Pashinyan and Aliyev has become sharper and more strident. While Aliyev
continues the usual barrage of threats, use of force and other “era of peace”
tactics, Pashinyan, who usually does not respond in kind, has come back with
his own salvo accusing Aliyev of plotting
genocide against the Armenians of Artsakh, breaching
their agreement to refrain from the language of threats and force, and making
other arrogant
statements.
Most of this newfound temerity comes since the
trilateral summit in Sochi, where Putin stated that the Western peace proposals
left Artsakh in Azerbaijan, but Russia’s plan postponed a status definition to
a future generation. Putin also achieved a trilateral statement of non-use of
force, and continuation of negotiations based on the existing agreements since
November 2020.
●
Did Sochi give Pashinyan some room to maneuver
vis-à-vis Aliyev and the West?
●
In the past week US Secretary of State Blinken
has called Pashinyan and Aliyev, separately, exhorting them to continue
negotiations and to not miss the opportunity for settling their disputes.
●
Has something led Blinken to believe that either
Armenia or Azerbaijan is ready to give up on the Western mediated negotiations?
Or negotiations, period?
In this phase of discussions, while Pashinyan
has been repeating his determination to sign a so-called peace agreement, he’s
also saying that Baku needs to talk to the Artsakh authorities and reach an
agreement that is acceptable to the Armenians of Artsakh.
Aliyev said they’re ready to negotiate directly
with Stepanakert but not with Ruben Vardanyan whom he called a Russian agent.
The authorities in Artsakh have rejected a bilateral format and have insisted
on an internationally mediated platform.
Phil Reeker said
during congressional hearings, that there must be “internationally visible”
mechanisms for direct negotiations.
●
Can this format have any success? Is it a
replacement for the OSCE MG?
●
How does this relate to the “Russian plan” which
wanted to delay the status of Artsakh?
Last week the French Senate nearly unanimously passed
a resolution on Artsakh. Among other things, it reaffirmed
its previous recognition of Artsakh, called for sanctions against Azerbaijan
and called for the opening of a cultural office in Stepanakert.
●
What are your thoughts about this development?
●
What real impact will it have on the ground, in
the negotiations?
The opposition has now officially resumed
its participation in the parliamentary discussions.
●
Were they right to take this step?
●
How should we assess their activities?
That was our Week in Review
and we hope you found it helpful. We invite your feedback and your suggestions.
You can find
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Thanks to Laura Osborn for
the music on our podcasts. On behalf of everyone in this episode, we thank you
for listening. Stay well, we’ll be back next week.
Hrant Mikaelian,
Armenia, Armenian Economy, Economy, Inflation, Central Bank of Armenia,
National Budget, 2023 Budget, National Debt, GDP, Defense Expenditures,
Industry Sectors, IT Sector, Infrastructure, Sochi, Trilateral Summit, Nikol Pashinyan, Ilham Aliyev, Vladimir Putin, Armenian
Opposition, National Assembly, Parliament, Pativ Unem, Hayastan Dashinq, Armenia
Alliance, Artsakh, Nagorno Karabakh, Stepanakert, Ruben Vardanyan,