Armenia Needs To Change Its Economic Development Model

ARMENIA NEEDS TO CHANGE ITS ECONOMIC DEVELOPMENT MODEL

ARKA
September 22, 2011

ARKA’s exclusive interview with Manuk Hergnyan, chairman of Economy
and Values research center.

ARKA – International experts are predicting a second wave of the
global crisis. Do you think it will break out soon and if yes will
it affect Armenia?

M. Hergnyan – It is difficult to predict when a second wave of the
global economic crisis may break out, nonetheless we can indicate a
set of preconditions, preceding such crises, like worsening financial
standing of some developed countries, especially their huge public
debts and the problems they are facing to service them. If another
crisis starts in developed countries, the new wave will spread to
all the countries, and Armenia will not escape it.

Armenia has very limited resources to avoid or mitigate the possible
after-effects of another crisis. This is why we need to understand what
alternative paths we have to be able to withstand such a situation.

ARKA – What kind of practical steps can the government in Yerevan take
to improve macroeconomic policies allowing to mitigate consequences
of another economic decline?

M. Hergnyan – I would like to reiterate that we need first of all
to change our economic development pattern through a fundamental
transformation. I think in the event of a second wave of crisis
Armenia will be little flexible to deal with it by using its available
macroeconomic tools, because we have already reached the maximum
limit of external debt and macroeconomic situation in the country is
not so satisfactory and there is no room for expansive policy.

In fact, we are more vulnerable to a second wave of the crisis. In
order to be ready for it the government should focus on export-oriented
policies in order to be able to present competitive goods at foreign
markets.

In this context the government should also shape a diversified economic
basis, because the crisis can affect many economic sectors.

Concentration on one economic area leads, in case of a crisis, to a
significant economic decline. Consequently, the diversification of
the economic base is very important, and it should be enforced for
the medium term. And the longer we delay a fundamental solution,
the more vulnerable we become.

ARKA – Is it possible to solve this problem before the second wave
of the crisis?

M. Hergnyan – It depends on when the second wave of the crisis may
come, but we should take all precautionary measures as quickly as
possible.

ARKA – Are there now steps being made in this direction?

M. Hergnyan – We helped the government to form an export-oriented
industrial policy, which, in essence, is a transformational strategy
that could change the pattern of economic development. Nevertheless,
to implement it the government should have courage and decisiveness.

It can not drag on it, so we need to find opportunities and to initiate
concrete steps now.

From: Emil Lazarian | Ararat NewsPress