13:29, 9 March, 2020
YEREVAN, MARCH 9, ARMENPRESS. Major decline in remittances, significant increase in international reserves in Armenia are important features to ensure stability in the country in the context of oil price drop, Economist Gor Tsarukyan told Armenpress, commenting on the sharp decline in global oil prices.
He said Armenia’s economy is interconnected with Russia and its other trade partners. Thus, if there are problems in these economies connected with the decline of oil prices, they also can leave their effect on Armenia like that happened in 2014. But the economist added that compared to 2014, this time Armenia has all resources to ensure stability conditioned by several factors.
“First and the most important are the transfers. The remittances sent to Armenia, I mean the money transfers on behalf of individuals to GDP, have declined greatly. If in 2013 this figure was 13%, in 2014-10.5%, in 2019 it was 3.7%. We can state that the Armenian economy’s dependence on foreign transfers has declined by 3 times. If we consider the worst scenario, that is if the Russian ruble depreciates, the remittances from Russia to Armenia decline, there will be a little affect on our economy. In other words, today our economy is not so sensitive to the remittances as it was in 2013-2014”, he said.
The next key factor is the stability of the Armenian dram, as well as the great increase of Armenia’s international reserves. The economist said the Central Bank was collecting foreign currency in the market at the expense of dram, thus increasing the international reserves. In late 2019 Armenia’s international reserves comprised 2.8 billion USD which is an unprecedented high figure.
“Even if there is an undesirable effect conditioned by international developments, the Central Bank of Armenia has all resources to take actions if necessary to prevent the negative consequences. Stability will most likely be maintained”, Gor Tsarukyan said.
The cost of futures for Brent crude oil with settlement in May 2020 on the ICE Exchange in London fell by 33.4% to $33.94 per barrel.
As for the current situation caused by the novel coronavirus, the economist said the virus greatly affected China’s economy, but this country was an important link in the global economy.
“The developments caused by the coronavirus have just accelerated the process of the decline of oil prices. Here we should take into account the fact that the US, Canada and other major countries have taken steps and brought additional activeness to their economies for the crisis to have less effect. I would avoid making predictions, but I think that this situation will be short-term, I don’t think that the decline of oil prices will be in the long-run”, the economist added.
Edited and translated by Aneta Harutyunyan