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 ARMENIA-DIASPORA RELATIONS: 20 YEARS SINCE INDEPENDENCE
YEREVAN'S 2009 MUNICIPAL ELECTION
IMPLICATIONS OF FINANCIAL CRISIS FOR ARMENIA 
ARMENIA’S 2008 PRESIDENTIAL ELECTION 
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Economics, Finance, Business, and Development
In terms of activity farther away from Armenia, the following set of charts (shared with us by a World Bank colleague) on the Asian economies speaks volumes about troubles facing economies that are much more diversified and resilient than Armenia’s. It turns out, economic activity in Asia in the fourth quarter of 2008 was much worse than expected and much worse than during the 1997 Asian Crisis. This is likely to persist through the second quarter of 2009. Here are some country-by-country specifics:
More... ... - The estimate of Singapore’s 4Q GDP is that GDP contracted at a 12.4 percent annualized rate, the largest decline in Singapore’s economic history. So far, peak-to-trough Singapore’s GDP has contracted 6.1 percent, approaching the extent of contraction in 2001.
- In November and December, Korea’s exports have declined 30 percent. Industrial production is on track to decline at least 10 percent quarter-on-quarter in 4Q, or 40 percent annualized.
- In Taiwan, in September-November industrial production slumped 25 percent. Exports dropped by nearly half since August, and declined by 27 percent quarter-on-quarter in 4Q, dropping another 18 percent in December compared to November.
- The shock to industrial activity in Japan is of a similar magnitude, with industrial production on track to slip to the lowest level since 1987.
All in all, analysts following Asia find that the shock to Asian industrial activity is without precedent in modern times and the situation is increasingly taking the form of a new Asian Crisis.
Posted By: Moderator on Jan 16, 2009 11:44PM
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This one is from Reuters Business Europe, published today.
ISTANBUL, Jan 15 (Reuters) - Turkey's unemployment rate rose to 10.9 percent between September and November, official data showed on Thursday, hit by a global economic downturn that has shrunk consumer demand and harmed company profits.
The unemployment rate was 9.7 percent in the same period of 2007, the Turkish Statistics Institute said. The rate, measured on a three-month moving average, was 10.3 percent in the August-October period of 2008.
Turkish manufacturers have slashed jobs and suspended production as demand, both domestically and for exports, plunges as worldwide growth slows. Turkey's economic growth hit a six-year low in the third-quarter of 2008.
``This jump in the unemployment rate is pronounced, and I expect it to get worse before it gets better,'' said Yarkin Cebeci, an economist at JPMorgan in Istanbul. ``The government should agree on the IMF deal without losing more time and announce its package of measures ``to bolster the economy.
The lira (IYIX-) weakened 1.3 percent to 1. More... ...6230 against the dollar amid a selloff in emerging markets and moves ahead of a Turkish central bank monetary policy meeting expected to decide on a rate cut of 100 basis points, according to economists. Government officials are in talks with the International Monetary Fund on a new loan to succeed a $10 billion pact that expired in May. The accord may seek to rein in government spending as budget revenues decline amid slower growth.
The number of people who are employed rose between September and November to 21.95 million from 21.31 million in the same period of 2007, according to the Statistics Institute. Turkey's population is about 70 million.
The impact of the worldwide financial crisis has forced one out of five Turkish youths into unemployment, according to official data. Jobless claims in November, the latest available data, jumped 147 percent. The government is due to release updated job claims figures on Thursday.
Economists have said the official unemployment figures are below the real jobless rate because more than half of the Turkish economy is unregistered.
Posted By: Moderator on Jan 15, 2009 12:43PM
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In the meantime, some relevant news closer to home...
(By New York Times, January 15, 2009, Section A; Page 10; Column c. 2009 New York Times Company, By ELLEN BARRY)
MOSCOW -- Violent protests over political grievances and mounting economic woes shook the Latvian capital, Riga, late Tuesday, leaving around 25 people injured and leading to 106 arrests.
In the wake of the demonstrations, President Valdis Zatlers threatened Wednesday to call for a referendum that would allow voters to dissolve Parliament, saying trust in the government, including in its ability to deal with growing economic problems, had "collapsed catastrophically."
For years, Latvia boasted of double-digit economic growth rates, but it has been shaken by the global economic downturn. Its central bank has spent a fifth of its reserves to guard against a steep devaluation of its currency, the lat, and experts expect a 5 percent contraction of the country's gross domestic product in 2009. Salaries are expected to fall substantially, and unemployment is expected to rise. More... ...
The violence followed days of clashes in Greece last month over a number of issues, including economic stagnation and rising poverty as well as widespread corruption and a troubled education system. In Bulgaria on Wednesday, separate riots broke out in the capital, Sofia, after more than 2,000 people -- including students, farmers and environmental activists -- demonstrated in front of Parliament over economic conditions, Reuters reported.
Mr. Zatlers has long been aligned with the governing coalition, so his threat to dissolve Parliament came as a surprise -- and was testament to nervousness about how economic troubles in the region could intersect with simmering political grievances.
The rioting broke out Tuesday after around 10,000 people protested in historic Dome Square over the economic troubles and grievances involving corruption and competence of the government.
Several hundred protesters lingered after most of the crowd had left and started throwing snowballs and cobblestones at government buildings.
Several demonstrators also threw Molotov c***tails, according to Mareks Mattisons, a spokesman for Latvia's Interior Ministry. In a public statement on Wednesday, President Zatlers denounced the violence, but said it was more important to ask "why people gathered in Dome Square."
"We must not face further confrontation, we must do the things that are demanded by the public," he said. "I refer to constitutional amendments, a plan to stimulate the economy, and reform of the national system of governance."
Krisjanis Karins, a member of Parliament and former leader of the opposition New Era party, said the violence showed that financial woes had injected a new vehemence into old political complaints.
Protests in Latvia, he said, tended to follow a pattern of "standing, singing and just going home," but the young protesters who showed up on Tuesday evening "seem to think the Greek or French way of expressing anger is better," he said.
"In our neck of the woods, this just doesn't happen," he said. "But it did this time. Everyone is trying to figure out how much of this was provoked. Who are these people? Where did they come from?"
Whatever the answer, he said, Tuesday's protests seem likely to force political change.
"In six months, we're going to look back and yesterday will be a watershed," he said. "I would be deeply surprised if it were not."
President Zatlers made a series of strict demands of the Parliament, including a constitutional amendment that would allow voters to dismiss Parliament, and a new supervisory council to oversee economic development and the state's use of loans.
He called for "new faces in the government," chosen for competence rather than "their influence in the relevant party." He said the changes must be made by March 31, or else he would propose a referendum that could dissolve Parliament.
"Only with such specific work can we calm the public down and offer at least a bit of hope that the process in this country will develop in a favorable direction," he said.
Posted By: Moderator on Jan 15, 2009 12:26PM
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Dear Friends:
I hope all of you had a restful holiday season. We will re-start our blog on the economic conditions in Armenia after a holiday break. Much has happened in the past 2 weeks and we are eager to renew our discussion of events in economic and social front in Armenia as well as its trading partners.
In the upcoming week or so, we intend to focus on developments on the macroeconomic front and discuss some of the statements and reports that have been issued since we made our last post in December. Specifically, we will discuss/comment on the following:
• Interview with the Prime Minister Tigran Sargsyan (ArmeniaLiberty) and with More...
Posted By: Moderator on Jan 11, 2009 05:52PM
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As promised a few days ago, I thought some of you would be interested in knowing the list of factors that affect the Russian economy More... ... according to a recent World Bank report. At least three of the four factors listed below have implication for the economy of Armenia. Anyway, here is the summary for your review and comments:
Four major related shocks appear to have transmitted the global crisis to Russia:
• First, the intensification of the global crisis caused a sudden stop and then a reversal in capital flows as investors fled to quality across world markets, Russia included.
• Second, the global credit crunch has affected Russia’s banking system, which faces its own liquidity problems against short-term external repayment obligations.
• Third, a sharp drop in the price of oil began to erode Russia’s fiscal and external account surpluses and very large international reserve buffer.
• Fourth, Russia’s stock market experienced a massive decline––largely reflecting the global loss of confidence and the precipitous drop in the price of oil––losing two-thirds of its value in the less than five months to mid-November 2008.
These shocks are slowing domestic demand––hitherto the engine of Russia’s growth––posing new policy challenges in a dramatically different external and domestic environment from just a few months ago. The main policy challenge now is to limit the inevitable impact of the crisis on the real economy while safeguarding hard-won gains in macroeconomic, especially fiscal stability.
Posted By: Moderator on Dec 24, 2008 05:19PM
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As reported by Oxford Analityca, the establishment by five CIS countries of a cross-county aid fund is another sign of worsening economic conditions in these countries. However, the report does not specify how the funds will be used (i.e., for what specific purpose) and what would trigger the disbursements of the money.The text of the report is copied below.
CIS: Five countries agree to create cross-border fund
Tuesday, December 23 2008
Representatives from Russia, Kazakhstan, Armenia, Kyrgyzstan and Tajikistan have agreed to create a 10 billion dollar cross-border aid fund, the Kazakh president's press service announced yesterday. The fund, conceptualized at a December 19-21 informal regional summit, is intended to counter the effects of the global financial crisis. Four of the five participating countries are members of the Eurasian Economic Community (Eurasec), and Armenia has observer status, but it is unclear whether the fund will be administered through Eurasec. More... ... Russia is almost certain to be the primary donor country for the fund, but Kazakhstan will probably contribute as well. Although Kyrgyzstan and Tajikistan's economies have been relatively insulated from the global financial crisis, both countries are highly vulnerable to food price inflation, water shortages and energy supply fluctuations. The establishment of the fund suggests that Russia is not ignorant of the effects of the economic crisis on its neighbors, nor of the increased potential for instability arising from deteriorating socioeconomic conditions. With workers' remittances expected to decline, poorer CIS countries may become dependent on aid from Moscow and elsewhere.
Posted By: Moderator on Dec 24, 2008 05:04PM
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As reported by Arminfo news agency on December 19, Armenia's Gross Domestic Product contracted by 30.6 percent in nominal terms in November compared to October of this year. Obviously, some of this decline is due to seasonal factors (e.g., natural end-year drop in agricultural production and construction, etc. Data on monthly GDP from previous years could shed some light on what the importance of the seasonality would be in this regard). However, this still leaves a large chunk of the decline in production to be accounted by the non-seasonal trends. Moreover, if measured in real terms (i.e., nominal decline minus growth in the GDP deflator for the month), the decline will be even more pronounced, since DGP deflator seems to be on the rise (as reported in the article). This is not trivial and appears to be one of the first serious signs of the crisis in the making. We promise to keep you updated with these developments and the government's measures to contain the crisis. More... ... In the meantime, we are interested in hearing from you regarding any anecdotal evidence of the economic slowdown and of behavioral changes, if any, that are likely to follow (e.g., cuts in consumer spending, etc.) and may exacerbate the situation.
I think this is a very useful report and analysis that should be helpful to the decision makers in Armenia, whether in the executive or legislative branches. There is a clear void in Armenia for this kind of economic analysis and reports, which are easy to understand and at the same time have academic standard. I think it would be a good idea to translate PFA Report to Armenian, because many of the decision makers don't know English.
Posted By: Ara Khanjian on Dec 29, 2008 02:13PM
In an apparent case of political vendetta against opponents, the government on Friday proceeded with auctioning off the assets of one of Armenia’s successful enterprises, Bjni mineral water company, More... ... ArmeniaLiberty.org reports (in Armenian). This was apparently done in such a rush that the authorities even ignored the fact that Bjni has applied to the court to declare itself bankrupt, which would under normal circumstances provide some legal shelter against creditors, including the government, while the court-appointed measures are being taken to address the underlying problems. It turns out that the company, which was under investigation since November 2007, shortly after its owner declared his support for the opposition, allegedly owes some back taxes and environmental fees. I wonder if Bjni had an opportunity to dispute the government’s case in the court. Judging from the speed with which the government began auctioning off its assets, chances are the company will no longer have that option. Long story short, the nature of this unprecedented event and its handling is likely to send a strong signal to potential investors and business community concerning the business environment in Armenia. This signal goes against not only the anti-crisis measures recommended in the PFA Crisis Report but also the government’s own declared objectives. We would like to hear your views about this.
Posted By: Moderator on Dec 21, 2008 10:09PM
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Speaking at a press conference in Yerevan, former chairman of the Central Bank of Armenia (CBA), Bagrat Asatryan expressed an opinion that--as reported by A1plus--the CBA's intervening on the foreign currency market by selling dollars is the wrong policy response to the current situation and that this is damaging for the economy. He alleged that the authorities are also using moral suasion to keep the exchange rate for dram below 310 per US dollar. If you recall, the PFA's Crisis Report advocates for a much more flexible dram and for minimal, if any, interventions by the Central Bank with an objective of maintaining the exchange rate.
More... ... In a surprised interview to Zhamanak daily (in Armenian), a wealthy businessman, former parliamentarian, chairman of the pro-government United Labor Party, Gurgen Arsenyan, had this to say regarding the authorities' handling of the situation (translation is ours): "Instead of taking measures against the world financial crisis, which is heading our way with 7 mile long steps and a hammer in its hand to hit us in the head, the government is in a state of clueless happiness or is acting as an anesthesiologist, trying to put the society to sleep."
In the meantime, there are more reports of the problems hitting closer to Yerevan (i.e., not only the mining companies in the South and the chemical industry in the North). As reported by ArmInfo, citing the slowdown of global demand, a spokesperson for the giant Nairit chemical plant, which specializes in production of duprene rubber, has announced of the plant's closure until February 1, 2009.
Through my 'Blowing the World Bank Whistle' better-not-wb-the-wb.blogspot.com campaign. I have long argued that the Armenian economic boom has been fabricated, based on FDI, which has essentially been the misappropriation of state assets, and a corrupt money-laundering construction industry. I have written that the bubble actually burst a year ago, and now the effects are starting to be felt. It will get much worse and very quickly after the New Year - and a Happy one to Everybody.
The PFA report quite rightly puts at the top of its list a 'Decline in Remittance Flows', especially from Russia, although I suggest their official figure of $1.3 - $1.5 Billion is probably half the actual figure. The report does not however cover how the Armenian workers in Russia (and other FSU republics) will soon be flooding back to Armenia, which not only cuts off that section of the money supply, but has a reverse effect on the Republics proud achievements in 'Poverty Reduction', which was in practice mainly the result of lesser-privileged Armenians being forced out of the Repubic in search of work. More... ... Also, Armenian banks depend heavily on money transfer fees, which will reduce dramatically.
Regarding the Dram / Dollar rate, any economist of any worth must understand what is behind that, and the disastrous effects it has on the Armenian economy. Then, of course state-imposed lawlessness must be stamped out for Armenia to have any chance of a real recovery.
Citing combined sources, an article in today's Asbarez lays out Armenian government's position on their anti-crisis capabilities and plans. Short of saying the government may be in denial of what is taking place in and around Armenia, we are curious to see what real measures have been taken so far to go with the rhetoric. For now, it seems that the government is still talking about target tax collection, which seems to contradict with what one of the large corporate taxpayers is saying on the record (see the article).
We are interested in hearing from you with any information or views you may have on these issues. Please email us at exrelations@pf-armenia.org or insert your remarks in the comments section below.
I believe I am correct that in 2008 the tax office accounting system changed from 'Cash' to 'Accrual'.
I have not as yet seen this reported in the press, and suggest that organizations such as Policy Forum Armenia should pay particular attention.
If I am correct, then it opens the floodgates for more government corruption and the possibility of a repeat 'Government Finance Rehabilitation Plan', which was used in 2004 to illegally 'privatize' major state assets - supported by the WB and the IMF.
To quote Jimmy McHugh: IMF intention with this $107 million scam is 'Dependent on my Conscience'!
I believe I am correct that in 2008 the tax office accounting system changed from 'Cash' to 'Accrual'.
I have not as yet seen this reported in the press, and suggest that organizations such as Policy Forum Armenia should pay particular attention to this fundamental change.
If I am correct, then it opens the floodgates for more government corruption and the possibility of a repeat 'Government Finance Rehabilitation Plan', which was used in 2004 to illegally 'privatize' major state assets - supported by the WB and the IMF.
To quote Jimmy McHugh: IMF intention with this $107 million scam is 'Dependent on my Conscience'!
Sorry, that comment came up twice. But whilst I am at it, the comment should not read IMF intention, but intervention.
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