Sargsyan’s Economic Promises vs. Reality

During the first session of the newly-elected National Assembly, RA President Serzh Sargsyan had an extensive speech introducing the vision for long-term development of Armenia. In his speech, he also addressed a number of main indicators, namely, the target values envisaged for the year 2040.

Unfortunately, many of those indicators are not only too ambitious, but also too far from reality.

Economic Growth

In the economy-related part of his speech, Sargsyan noted that it is envisaged to ensure an average of 5% annual economic growth during 2016-2040, thus turning the current GDP rate from 10.5 billion USD to 60 billion USD.

First of all, it is worth noting that you need to provide 7.5%, rather than 5% annual economic growth in order to ensure more than 5.5 times higher GDP rate. In order to understand the unreality of this economic growth rate, it is sufficient to note that the 2016 economic growth formed 7.73% in India, 6.37% in China and 1.6% in the USA. On the other hand, the year 2016 saw an economic growth of only 0.2% in Armenia, while the International Monetary Fund predicts economic growth of 2.9% for 2017 and 2018. And this number is quite far from the aforementioned values.

Poverty

In continuation of his speech, Sargsyan noted that it is envisaged to reduce the poverty rate in Armenia to at least 18% during the coming five years, and up to 8% till 2040.

Statistical data show that under equivalence to the upper threshold of poverty (41.698 AMD) the poverty rate in Armenia formed 29.8% in 2015. This means that about 900 thousand people in Armenia are poor, among which 300 thousand are very poor, and 60 thousand are extremely poor. Moreover, if we equalize the poverty threshold with the minimum consumer basket value (49 thousand AMD), we will see that in reality the number of poor people in our republic exceeds 1 million.

In such conditions, continuous growth of the income of the population needs to be ensured for targeted poverty reduction. But the problem is that income distribution in Armenia will be highly unequal even under rapid economic growth. An evidence of the aforementioned claim is that the Gini index has considerable increased compared to 2008, reaching 0.374 from 0.339.

Emigration

Another part of Sargsyan’s speech was dedicated to the demographic situation in Armenia. According to the President, it is possible to raise the population number to 4 million through halting immigration, increasing birth rate and lengthening life expectancy.

However, the statistical data reflecting the demographic situation outline quite different prospects. Compared to 2015, the absolute number of births dropped by more than 10% in the first quarter of 2017, reaching 8534 from 9400. Conversely, deaths have increased by about 4%. As a result, the rate of natural increase has declined by about 70% in the first quarter of 2017 compared to 2015, reaching 497 only.

Not to mention the growing scale of migration… In 2016, the number of people who left the republic exceeded that of the people who entered the country by 49 thousand, and this indicator exceeds the one of the previous year by 11%. It should also be noted that already 16 thousand people have left Armenian territory during the first quarter of 2017.

Taking into account the situation in economic and social-demographic directions, it is not clear what relation the target indicators have to reality and how they will be ensured.