Armenia's population loses solvency
By Abdul Kerimkhanov
Recently, Armenian Prime Minister Nikol Pashinyan has been periodically making statements regarding the socio-economic situation in the country. However, in most cases, the figures that he presents later turn out to be controversial or even completely wrong.
In a recent statement, Pashinyan said that there has been an increase in the real estate market of Armenia, that there are more buyers of real estate than sellers, and that the number of real estate transactions has grown significantly compared to last year. Of particular note is his remark that in June 2019, the volume of mortgage loans increased by 174 percent compared to June 2018, and in January-June 2019 - by 120 percent compared to the first half of 2018.
Unfortunately for Pashinyan, these indicators do not mean a change for the better. On the contrary, unprecedented growth in mortgage lending poses serious risks for the banking sector in particular, and in general, for the Armenian state.
A sharp increase in mortgage lending could be a positive indicator only with an equally sharp increase in the population’s solvency. However, Armenian citizens should not have any special illusions in this regard.
For instance, the average monthly salary as of June of the current year is 176,000 drams ($370) in Armenia. Before the ‘velvet revolution’, this indicator was a bit higher: in 2017, the average salary was 177,000 drams ($372).
In fact, there were no significant changes in this indicator and the solvency of the population did not increase. In turn, mortgage lending, which should depend on solvency, for some reason shows a record growth. As a result, the risks associated with the inability of borrowers to pay off their loan obligations are obvious.
Another indicator relating to the labor market also indicates a decrease in the solvency of the population. During the first quarter of this year, the number of the unemployed in Armenia increased by 16,000 people compared to the same period last year, according to the Armenian Statistics Committee. It is obvious that these trends also hit hard on the solvency level.
So, in fact, the Armenian PM rejoices that the insolvent population received a record number of mortgages.
The tendency to increase the volume of mortgage loans poses a threat to banks that issued loans, but are clearly not sure that the money is repayable. In turn, some of the borrowers who cannot repay the money may actually be in a debt hole.
There is nothing good in this news for the Armenian state, which may have to resolve a possible huge problem between banks and the population soon.
Although Pashinyan tries to present bad news as good, the situation does not change for the better at all. Armenian PM is engaged in self-deception, either because of lack of understanding of the real situation or inability to adequately analyze it.
However, it is highly likely that he deliberately misleads the Armenian society.
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Abdul Kerimkhanov is AzerNews’ staff journalist, follow him on Twitter: @AbdulKerim94
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