Government Misses Economic Projections Say Authorities

YEREVAN (RFE/RL)–Despite worse-than-expected macroeconomic indicators–the past year has seen certain encouraging developmen’s in the Armenian economy–which provide grounds for optimism–senior government officials said in yearend interviews with Radio Free Europe and Radio Liberty.

Armenian government officials responsible for economic issues have given a mixed picture of the country’s economic performance in 1997 with a slow economic growth–still double-digit inflation but large-scale privatization and better tax collection record.

According to Finance and Economics Minister Armen Darbinian–the year was not a "particularly good" one–as the government had expected better economic results. Indeed–the government has fallen short of ensuring its projected 6 percent GDP growth and 10 percent inflation rates.

Inflation hit 15 percent already in the first half of 1997–and the estimates are that it will be somewhere around 20 percent for the entire year. By the same token–the growth rate is expected not to exceed 3 percent–which primarily reflects the deplorable state of Armenian industry. In the words of Industry and Trade Minister Garnik Nanagulian–1997 has been "one of the hardest years for the Armenian industry." Output is expected to be slightly lower than in 1996–despite overall GDP growth.

Nanagulian said most former and current state enterprises–wracked by heavy debts–have seen no substantial investment in the past eight years–and–consequently–are not competitive. He said enterprises need to undergo serious restructuring as well as financial adjustment measures to find their markets.

The two ministers noted–however–a certain improvement of the situation in the second half of the year–with Nanagulian claiming some "revival" in the light–chemical and metallurgical industry branches. Darbinian said the production fall was then stopped–which–coupled with much improved tax collection–has enabled the government to secure the planned amount of budget revenues. In fact–it is the better tax collection record that–according to local analysts–is the key achievement of Prime Minister Robert Kocharian’s cabinet.

And this gives the head of the tax department–Artashes Tumanian–grounds to maintain that his agency has largely accomplished its tasks for 1997. He said this "promising trend" will continue next year. Tumanian said the shadow economy–which is estimated to comprise 50 to 70 percent of all economic activities in Armenia–has been hit badly.

Another domain where the government boasts remarkable–albeit so far quantitative success is–as Privatization Minister Pavel Ghaltakhchian put it–the "mass privatization" of state property.

The privatization process that got underway back in 1991 gained momentum two years ago–and so far has been carried out mainly through vouchers distributed to every Armenian citizen. According to Ghaltakhchian–65 percent of medium and large and over 90 percent of small state enterprises have already been privatized. But most of them have yet to become successful businesses.

"Privatization has not helped the industry yet," Nanagulian complained. This has led the government to reconsider its strategy–shifting to the so-called auction privatization of the remaining industrial giants. Ghaltakhchian said the government will take an individual approach when deciding their fate. The emphasis–he added–will be put on the amount of investment their prospective owners are prepared to commit themselves to. This will supposedly ensure effective operation of those enterprises.

The government does already have experience with selling off the state telephone company Armentel through an international tender. The deal which was finalized at about $100 million–with an additional $300 million to be invested in the coming years–added tremendously to the budget–although no accounting has been presented for. Besides–bidding has already been opened for a number of other large enterprises.

Speaking about 1998–the four highly-placed officials sounded more optimistic–anticipating tangible progress in the Armenian economy.

Darbinian was particularly happy about the fact that after a two-month debate the parliament approved the government’s 1998 budget last week.

He called it a "maximum balanced" budget–involving "unprecedented" goals: low deficit but a considerable rise in social spending and budget expenditure in general. Meanwhile–the government’s macroeconomic targets remain essentially unchanged. The first half of the next year will show whether they will materialize this time.


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