Armenia's economy: features of development

Armenia in the early twenty-first century was a small republic of Transcaucasia, located in the interfluve of the Kura and Araks. The area of the state is less than 30 thousand square meters. M., And the population - about 3 million people.

Specific features of the Armenian economy

Features of the Armenian economy in recent decades depend on several factors:

1. The Soviet economy, with its weak and strong sides, continues to exert great influence. In these decades, the republic significantly increased its economic level, but at the same time it absorbed the negative components of the economy of the USSR and became part of the overall mechanism, which still has a very serious impact on the welfare of the country.
2. Ambiguous development in modern times (since 1992) failed to make the economy stable and highly developed.
3. Geographical component. Most of Armenia is mountains. There are relatively few agricultural lands on the territory of the country, and the food issue remains rather acute.
4. Complex geopolitical situation. Armenia does not have free access to the sea, although it is located between the Black and Caspian seas. Neighboring countries are either hostile (Azerbaijan, Turkey), or they lack good transport arteries (Iran). Because of this, export-import relations are difficult and may even be interrupted.

Economic problems

Various reasons lead to the fact that the modern economy of Armenia (a feature of development) is poorly provided with own raw materials, only by 20%, with the predominance in industry of industries that process raw materials (legacy of the Soviet past). Despite the availability of different ores, marble, rock salt, the country can not supply its industry and is mainly based on imported raw materials. There is a shortage of food resources due to insufficient land, it has to be covered with imports, selling in exchange industry products. The geopolitical situation leads to complete dependence on external cargo links, which were expressed in the form of energy and transport isolation due to conflict conditions in the Transcaucasus.

Growth rates in the early years of the twenty-first century

In modern times (in 1994-2017) there is a significant economic development - almost fifteen times (up to $ 10 billion). However, such impressive figures grew primarily with the help of loans from international financial associations, foreign investments in the Armenian economy. Only private transfers to Armenia in 2010 came in the amount of more than one billion dollars, which amounted to half of the state budget. Almost all of the money came from the Russian Federation.

Foreign investments in the Armenian economy by 2009 amounted to 4703.2 million dollars. The leading investor (half of the investment amount) and the external owner was and remains Russia. The main areas of investment of Russian money are related to industry, finance, and the media.

At the same time, there is a change in the share of the directions of the Armenian economy. In the post-Soviet era, the industrial share in GDP declined from 44% to 15%, while the share of the service sector increased from 25% to 42% (the overall GDP dynamics is lower on the graph). This trend is confirmed by stable electricity consumption of 5.5-6.3 billion kWh, although the economy of the Republic of Armenia is constantly growing. That is, the energy consumption of manufacturing industries in recent decades has been steadily declining.

Industry

The industry of Armenia, like most of the former union republics, with independence was in a phase of a sharp decline. And although after a while there was a rise in industrial production, but this was evident only in comparison with the previous crisis years. Production in absolute figures has decreased many times, and for most types of products it has been interrupted altogether. The total number of workers and engineers decreased five-fold, and the use of electricity in industrial sectors - almost three-fold.

Unregulated adaptation to complex circumstances led to painful structural changes and simplification of the industry's industrial structure. The share of the main branches of engineering and light industry in the past fell from 34% and 24% to 1.6% and 1.2%. The share of the food industry rose from 16.3% to 52.9%. The percentage of the metallurgical industry (mainly semi-finished products - concentrates of copper and molybdenum) increased from 2.8% to 19.9%.

Agricultural production

Conducted in the early 1990s. The changes in agriculture had rather negative consequences, at least for the near future. Large collective and state farms were disbanded, in their place 340 thousand small private agricultural holdings were formed, mainly with land plots of 1.4 hectares. Significant damage was done to the production structure of agriculture.

Due to the narrow possibilities of patchwork farms for the XXI century. Almost 40% of cultivated soils are excluded from the field of agricultural work, the areas of traditional crops for Armenia have been severely curtailed. Almost 50% decreased irrigation agriculture Several times decreased the use of mineral fertilizers and pesticides, no crop rotation is used. In recent years, as a result of buying and selling, large strips of land have formed, which completely fall out of circulation, and for ordinary owners they have become commercial goods.

Expensive loans, weak state aid reduce the effectiveness of the agricultural sector, which is increasingly becoming a survival of the subsistence economy. Given Armenia's poor internal supplies of certain products and large imports from abroad, increasing the productivity of the agricultural sector will be the main task of the near future.

International trade

This branch of the economy is an important part of the Armenian economy. In the first years of the twenty-first century, trade amounted to almost $ 5.5 billion a year, but the crisis of 2008 significantly worsened the situation. Turnover decreased by almost 1 billion dollars. Among the more than 60 partner countries, Russia and Germany are the leading business associates (39% and 21.5% respectively). The United States remains another partner, although they are of much less importance.

The main problem of foreign trade is the high trade deficit. Import is growing at an accelerating rate in relation to exports in several times. The desire to change the situation is one of the main favorable options for economic strengthening of the country.

External debt

The newest era is characterized by a sharp increase in Armenia's external public debt. For 15 years, from 1995 to 2010, it has grown about 10 times, up to 3495 million dollars and is 44% of GDP. The narrow export base and the constant need for additional financing make it necessary to constantly increase external debt. Constant costs for payment of debt are an additional burden on the budget.

Social cost of development of Armenia

The social value of development is very significant. In the first years of independence, most people found themselves in a difficult situation. Only at this time, due to the difficult life and lack of opportunities, about 700-750 thousand people left Armenia or a fifth of the population.

By the middle of the 2010s. Average payments reach $ 270 per person, pensions - $ 80. 34% of the population have a monthly income of less than $ 85. Today's Armenia is characterized by a split society, where the poor majority is on one side, and the oligarchic minority on the other.

Due to the large number of problems, the population of Armenia is declining, which is clearly seen in the graph below.

The economy of Armenia in the following years

The future of the Armenian economy is rather vague because of the excessively large number of diverse realities.

A major obstacle to the economic strengthening of Armenia is its isolation from the outside world, it is caused by great dangers and an increase in cargo losses. Armenian-Iranian cooperation in the field of freight routes and energy is of great importance. Together with Iran, a shortened route linking Iran to Georgian ports is being built. The gas pipeline and the oil product pipeline between the two countries are being launched.

Strengthening the Armenian economy is hampered by the constant increase in the deficit of foreign trade. To gradually reduce the trade deficit, it is necessary to determine the rise of the economic policy aimed at accelerating industrial exports and substituting imports, as well as the direction of agrarian policy to improve the performance of agriculture.

It is necessary to carry out activities relating to domestic sources of economic acceleration, to establish agricultural production, to rely on ecological and alternative energy opportunities. All the directions of development of the Armenian economy should develop dynamically, otherwise the country will decline.