The Armenian National Statistical service has released the “Current-operative preliminary main macro-economic indicators” characterizing the socio-economic situation of Armenia for January-March 2009. The situation is sad – to say the least – the published data shows that the Armenian economy has shrinked by 6.1% compared with last year.
But the bare figure won’t tell you much. Consider this: data released for only January – February indicated a 3.7% slump in the economy. So March has gone that much wrong to affect the whole quarter so radically. As the economic activity starts to pick up, the difference in what economic (de)growth we have now and what we had only a year ago will likely become more obvious.
One of the key sectors leading the country into recession is the construction sector according to RFE/RL. It would be wrong to say, that the government is not doing anything to address the issue. Earlier this month Prime Minister announced government assistance to crisis-hit construction sector, which would hand out as much as 20 billion drams ($54 million) in loan guarantees for local construction firms lacking funds to complete their projects. The announcement about this is on Public TV these days, but we have yet to see how the measure will be implemented and will anybody actually risk taking the loan.
One thing the government can do – which it is reluctunt to, is to review the budget and make some major cuts.
Admittedly, budget cuts in recession times are not the panacea. In fact, it makes sence to boost government spending in an attempt to stimulate the economy, in the hope, that in the years to come the eonomic growth will compensate for the losses. And it seems like this is the government’s main argument in their reluctance to cut the record high 945.5 billion drams ($2.6 billion) budget.
However, let’s understand, that this year’s budget is based on over 9% economic growth estimation, and if the first quarter figures are any indication at all – the figure misses the point by as much as 15%. Naturally, the budget reveneues are set to decline accordingly, and government’s policy of ‘loaning their way into the budget’ will only mean huge deficit. Someone has to pay for all this… and I have that gut feeling, that it will be me and you!