Finance Ministry Official Paints Bleak Economic Picture

YEREVAN (Combined Sources)–The global economic crisis will impact money transfers, mortgage markets and the mining industry in Armenia, an Armenian Finance Ministry official said Wednesday during a seminar on the worsening state of world finance.

Private money transfers in Armenia are estimated at $1 to 2 billion, of which $600 million is transferred through banks, said Vardan Atoyan, the assistant to Armenia’s Deputy Finance Minister.

“These transfers are mainly sent here from Armenia’s working in construction and trade in Russia,” he said.

But the large number of Armenia’s traveling to Russia for work may well decrease this spring as the Russian economy increasingly feels the effects of the recent sharp fall in international prices of oil and other commodities.

The economic meltdown has been particularly acute in Russia, home to hundreds of thousands of Armenian migrant workers and the main source of the remittances. The Russian economy has also been hit hard by recent months’ sharp fall in international oil prices.

“That is why many our compatriots may lose their jobs,” Atonyan said.

Accordingly, analysts expect a drop in large-scale remittances from Armenian migrant workers that support a considerable part of the country’s population. The remittances appear to have already shrunk in the fourth quarter of 2008.

Atonyan went on to warn that many Armenian citizens working in Russia’s trade sector also face looming job cuts, noting the harsh restrictions imposed by the Russian government on foreigner workers in the industry.

Speaking on Armenia’s deteriorating mortgage market, Atonyan said Armenian banks have stopped extending mortgage loans, adding that the extension of credit to businesses is also under threat of freezing. “We think the main cause is cash shortage in banks”, he said.

Another negative consequence of the crisis has been a sharp fall in the international prices of non-ferrous metals, Armenia’s number one export item.

Commenting on Armenia’s ailing mining industry, Atoyan said that precipitous fall in prices for metals on world markets strikes hard at the industry, since the major part of its output is meant for export.

“Alaverdi, Kajaran and Agarak copper and molybdenum foundries and the Kapan mining complex face grave financial problems,” he said, noting that hundreds of employees of Armenian mining companies have already been laid off or sent on indefinite leave as a result.

The country’s two largest chemical enterprises have suspended their operations and are facing an uncertain future for the same reason.

Tourism, he said, will be the next sector to feel the effects of the recession.

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