TODAY.AZ / Analytics

Armenia grappling with ill economy

01 April 2014 [11:19] - TODAY.AZ
By AzerNews

Former Chairman of the Armenian Central Bank, economist Bagrat Asatryan has predicted a deep crisis for the country's ailing economy in the coming years.

"Armenia's weak economy depends strongly on the Russian economy. The country will face negative consequences of political-economic processes underway in Russia," he said.

He said, Armenia continues to remain a monopolistic country, where the economy is concentrated in the hands of a few families and this will pave the way for widespread corruption.

Asatryan believes that Armenia cannot develop till the country has no good relations with its neighbour countries.

"The settlement of relations with neighbours must be the main aim of the Armenian authorities," he said.

Armenia broke out a lengthy war against Azerbaijan laying territorial claims on its South Caucasus neighbour. Since a war in the early 1990s, Armenian armed forces have occupied 20 percent of Azerbaijan's territory, including Nagorno-Karabakh and seven surrounding regions.

Armenia's aggressive policy left the country out of all major regional economic projects, including the Baku-Tbilisi-Ceyhan oil pipeline and the Baku-Tbilisi-Kars railway.

As a response to Yerevan's aggressive policy, Turkey also closed its borders with Armenia, demanding it to withdraw its troops from occupied lands of Azerbaijan. The blockade of the country continues to slowdown economic growth in Armenia.

Recent developments in the Armenian currency market show that the country's market strongly depends on tourists from neighbouring Iran.

Armenian government has failed to prevent the devaluation of the national currency, dram since the beginning of 2014. This comes as the visits of Iranian tourists to the country had partly stabilized the currency.

The devaluation of dram has turned into an irreversible process in Armenia. This comes despite efforts by the country's Central Bank to introduce foreign exchange intervention to prevent dram devaluation.

Iranian tourists' visits to the capital Yerevan to celebrate Novruz holidays temporarily stopped the devaluation process in recent years but the process was resumed after reduction of the number of Iranian tourists.

The US dollar exchange rate in foreign exchange market hit 414 drams, increasing by two drams.

Armenia has turned into a country which is losing its attractiveness for Iranian tourists. The local media alarmed that there has been a decline in the number of Iranian tourists year by year.

Some 134,000 Iranian tourists visited Armenia in 2011. In 2012, their number declined to 111,000, and the number was 94,000 in 2013.

The Armenian tour operators reported that the number of Iranian tourists was record low in March, 2014 compared to the same period of the previous years.

"Now, Iranian tourists prefer Tbilisi to Yerevan. They are dissatisfied with taxi drivers demanding an inadequate fair, as well as the high prices, not only in stores, but also in small cafes and restaurants. Furthermore, hotel prices have risen sharply," the media reports said.

Armenian experts said the decline in the number of tourists has left thousands of people jobless. They predict that Armenia will face a significant decline in the number of tourists in the summer season.

Tourism Department of the Economy Ministry in turn hopes for gradual recovery of the previous indicators.

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