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Armenians warned against tougher economy

12 November 2014 18:18 (UTC+04:00)
Armenians warned against tougher economy

By Mushvig Mehdiyev

Ongoing crisis in Russia continues to threaten Armenia, the people of which even today feel its side effects.

Analysts forecast that the post-Soviet state will feel the results of the crisis in the northern giant's economy to the fullest in mid-December.

Sanctions exchange between Russia and the western forces has delivered more blows on the world's largest country since September. Russian ruble's drastic devaluation is one of challenges triggered by western sanctions.

The Yerevan-based Haykanak Zhamanak paper wrote that Armenia may face even this year the consequences of the economic crisis similar to the results of the stagnation in 2008. Comparing the current and past financial and economic hassles, the paper claimed that the crisis in 2008 hit Armenia through two factors - fall in the prices of non-ferrous metals produced in Armenia and devaluation of the Russian ruble.

The paper noted that the Russian ruble's devaluation rate was nearly 37 percent during the economic slump in 2008, inflicting the total volume of the private money transfers from Russia to Armenia. Now, the same trend is observed in the post-Soviet country, as the Russian currency has lost its value by 35 percent since September. The potent fall of the ruble will be fully noticed in Armenia in mid-December, the paper said.

"Russian ruble started to devaluate simultaneously with the imposition of sanctions by the western forces. Armenia's economy will face the shortfall of huge money by mid-December amid depreciating value of the ruble," the paper wrote, warning the residents to get ready for the scenario of 2008-2009 when Armenia's economy saw a 14.5 percent slump.

The Central Bank revealed a tiny increase in total bank remittances from Russia to Armenia in January to September this year -- only 0.4 percent. The bank said the same index was 8 percent prior to the Russian ruble's recent devaluation.

One Russian ruble is equal to 8.9 Armenian drams ($0.02) now, while it was on par with 12.5 drams ($0.031) earlier this year.

Reuters expert Marc Jones has earlier said the non-stop decline of the ruble will actually lead to a downturn characterized by domino effect in the economy of Armenia, which is accepted as one of the "ruble zones" among the former Soviet states. He also added that unfavorable results of the 2008 economic slump in Russia are still felt in the small Caucasus country.

The Armenian Finance Ministry is puzzled to forecast the real influence of the Russian economy's current deadlock on Armenian economy. Minister Gagik Khachatryan said nobody in the country could predict the future economic developments.

"If the sanctions imposed on Russia will remain for a long time, of course, it will deepen the problems in Armenia. Vice versa, if the sanctions will be short-term, then the risks will relent," Khacahtryan noted.

Russian economic hassle caused several challenges in Armenian economy, as weakened its domestic and foreign financial sources. Khacahtryan specified the Russian crisis's adverse impacts on Armenia, saying "Fall in certain economic fields, decrease in remittances and financial flows, as well as the problems with exporters are the key challenges that our country faces due to the economic stagnation in Russia."

He added that exporters avoid to be engaged in business activities in Armenia due to correlation between the dollar and ruble. "For now, the predictions are not favorable for Armenian economy. We need to accurately assess the situation and define the concrete directions of activity," he said.

Armenia's economy has currently slid to a low amid its multi-sided dependence on Russian economy. The northern giant is unable to forfend the continuous blows on its economy, being in an economic blockade by western forces. The challenges of the isolated Russian economy paralyzed Armenia's economic life to prove the failure of the non-free and inactive leadership in the country.

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