Armenia's Shadow Economy Sparks Scepticism Of Exaggerated Figures

(MENAFN- AzerNews)
Economy Sparks Scepticism Of Exaggerated Figures Image' Width='400' Height='400'/>
Elnur Enveroglu Read more

Various opinions about Armenia's economy have already become thehot topic of the day. Local and foreign media often reportexaggerated figures on the country's economy and the dazzlingresults of the rapidly growing shadow economy in the country,increasing the lack of confidence in the country's economic futurein the domestic audience.

Although landlocked Armenia shares a land border with 4countries, the country's international strategic capabilities arevery limited. The main reason for this is that Armenia occupied theterritories of Azerbaijan starting in 1993, and because of this,the borders with Turkiye and Azerbaijan remain closed to thisday.

The Armenian authorities have repeatedly appealed to the Turkishleadership regarding the opening of the border, however, the issueis still pending.

Nevertheless, Armenia has relations with Georgia and Iran, andalthough these relations are used for commercial purposes, they arenot able to bring further surpluses to the economy of thiscountry.

For example, if we just look at the statistical figures for2022, we can say that the volume of exports from Armenia to Iranwas approximately 111 million US dollars. About 59.6 percent ofthis was electric energy, 20 percent was rolled tobacco products,and the remaining 20 percent was made up of non-ferrous metal,glass, and other products. In addition, in Armenia, the internalmarket of the country has not been formed due to the fact thatfactories and companies bringing large-scale investments do notoperate.

The information provided recently states that Armenia plans toincrease the annual trade turnover with Iran to 3 billion USdollars. Although there is no detailed information about theagreements, the information mentions Armenia's "cooperation in 19fields" with Iran.

At the same time, there is an increase in Armenia's tradeturnover with Russia. But before looking at the numbers inArmenia's statistical data, let's think about the political side ofthe issue.

Where does Armenia get a large amount of income from? Why is theshadow economy criticised in Armenia, and the figures are said tobe exaggerated?

About a year ago, despite the Western sanctions on Russia,information about more than 20 Armenian companies establishingsecret trade relations with Russia spread rapidly. The West evenimposed an embargo on some of those companies. On the one hand,Armenia is increasing political tension with Russia, on the otherhand, it is strengthening its economic ties with the West's foe this trend may not be to the West's liking, it is true andliterally a cause for concern for some organisations in Westerncountries today.

The fact is that after the official Western sanctions on Moscow,Armenia's exports to Russia increased three times in 2022 alone, which joined the Eurasian Economic Union led by Russia in2014, for some reason began to strengthen its trade with Russiaprecisely after the Ukrainian war.

For example, the trade turnover between Armenia and Russia in2023 has grown by 43 percent, reaching $7 billion and 306 million,according to data from the National Statistical Committee ofArmenia for 2023.

The specific weight of Russia in Armenia's total foreign traderemained at about the same level (decreased from 35.6 percent to35.3 percent) compared to 2022, according to the statistics.

Exports from Armenia are up by almost 39 percent to a total of$3 billion and 418 million. This means that the share of exportsand imports in trade with Russia is almost the same (47 percent to53 percent).

Now let's get back to the answer to the main question. Accordingto the indicators of the International Monetary Fund for 2024, theGDP of Armenia is 8.58 thousand US dollars. Of course, since thecountry prefers more exports, the latest indicators of thecountry's GDP have fluctuated with a growth rate of about 3% to5%.

But what has not changed is the general living conditions of thepopulation in Armenia. Experts emphasise that Armenia eitheroverestimates the economic figures or that the country's income isused for different purposes. One of them is the rapid armamentpolicy of Armenia, especially after its defeat in the SecondGarabagh War in 2020.

According to the latest statistics of this year, the Armeniangovernment even increased the defence budget and allocated 557billion drams (approximately $1.38 billion). In addition, in 2021,Yerevan allocated about $600 million from the state budget formilitary purposes, and in 2022, the country increased militaryspending by more than 10%, reaching $750 million. As regardsArmenia's 2023 national budget for military expenditures, thisreached a record $1.28 billion, and this number was around a 46%increase in military expenditures in comparison with a yearago.

Despite all this, Armenia does not have the potential to wagewar in the next ten years. Today, according to the indicators,although the country's income is moving upwards, results stillremain murky, and no progress is tangible in people's welfareliving in Armenia.

The transparency of Armenia's economy seems to be possible onlywith the normalisation of neighbouring relations and its inclusionin the list of economic partners within the region. In the last fewmonths, the positive steps taken by the Armenian governmentregarding the establishment of borders with Azerbaijan have led tohigh predictions about the complete security of the region in thenear future. In addition, the restoration of relations betweenArmenia, Azerbaijan, and Turkiye increases confidence in theeconomic future of the South Caucasus.

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