Export brackets open up little by little

Export brackets open up little by little

Promises given in the action plan of the government, then in RPA pre-election program, as formerly stated, mostly didn’t contain target. Only several promises contained concreteness among which was reaching export volume to 40-45% of GDP.

It was covered in the government’s action plan and then in RPA pre-election program.

That part reads, “As a country with small internal market, Armenia should build its development model taking as a ground the economic growth conditioned by export. Our diagnosis: export yet has insufficient specific gravity in GDP. High degree of export centralization regarding both markets and exported production still remains problematic.

Export volume of products to neighboring countries is insufficient. Our purpose is shift from narrow exporting economy to diversified one, provided by boosting infrastructures, quick to response external, first and foremost, neighboring market demands.

On account of peculiarities of Armenia’s economy progressive growth of export should be the main moving force for the development. As a primary target it’s necessary to define provision of at least 40-45 percent specific gravity of export in GDP structure.”

Based on data issued by the National Statistical Service of Armenia, in 2016 export volume comprised around USD 1 billion 783 million, or 17% of GDP. This meant Armenia’s export volumes should triple in 5 years to provide export/GDP 45% ratio. On account of our export structure economists were sure that 40-45% index of GDP isn’t realistic, i.e. we deal with populism.

However, there was a nuance. The point is that there is a concept “export of goods” and “export of services and goods”, which is wider. Volume of export of goods comprises USD 1.8 billion, however, volume of export of services, in its turn, comprised around USD 1.6 billion. Altogether in 2016 goods-services amounting USD 3.4 billion have been exported from Armenia, which comprises 32.3% of GDP.

And reaching 45% from 32.6% isn’t as difficult as from 17%.

We supposed if this index will be necessary to grounding detail, the government will rely that we deal with the very export of “goods and services”.

They did.

Tigran Khachatryan, Deputy Minister of Economic Development and Investments, was hosted by “Azatutyun” radio a couple of days ago to the program “Economic freedom”. Asked how and on account of what export volume should be tripled until 2022 to reach 45% of GDP, T.Khachatryan said, “One correction prior to clarification. You mentioned that in the forthcoming six years export growth will be tripled. You assess this way as you only observe export of goods. And we touched upon export of goods and services.

USD 1 billion 783 million in 2016 comprised export of goods and USD 1 billion 610 million—export of services. Thus, they altogether comprise around USD 3.4 billion, which is 32.6% of GDP, i.e. our target is making that 32.6% to 45% until 2022, which was mentioned both by the president and in recent statements in the Cabinet.”

Tigran Khachatryan also provided detailed data on service export, stating that from USD 1 billion 610 million around USD 900 million was shared by tourism, USD 150 million—export of services in the field of IT.

On the same day Hovhannes Azizyan, another Deputy Minister of Economic Development and Investments, also touched upon target of 45% on “Armenia TV”. He stated that in the period of forthcoming 5 years provision of that index is rather realistic. H.Azizyan reminded that in 2016 export/GDP ratio comprised 33%, and before that in 2015—30%. “Such tendency—growth by 2-3 pp per year, is our outlined target, which we should reach, and as a result it’ll be possible to provide export/GDP 45% index,” the Deputy Minister said.

In fact, both Deputy Ministers clarified that the promise referred to export of services as well.

Of course, in this case provision of export/GDP 45% index isn’t so difficult. Even rough calculation can be made. Thus, if we take Serzh Sargsyan’s given number as a ground—5% real growth of GDP, in 2022 Armenia’s GDP by comparable prices (i.e. those of 2016) will comprise around 14 billion. This means in 2022 export volume of goods and services from Armenia should comprise USD 6.3-6.4 billion. And if we take into account change in prices—around USD 7 billion.

Thus, export volume should not be tripled, but doubled. At first glance rather ambitious index has been set. However, to provide it, export should record 11% real growth each year. On account of the fact that in the period of the first 4 months of ongoing year real growth comprises 16%, it can be stated that provision of 11% growth 5 years in a row is difficult, but not impossible.

A nuance should be mentioned as well. When 40-45% level was touched upon, recently it became “at least 45%”.

For instance, Suren Karayan, Minister of Economic Development and Investments, stated after the meeting with president Sargsyan that they have discussed the ways and fields through which those indices should be reached, that export comprised 45% of GDP, i.e. the government raises the benchmark.

It seems everything is OK. However, one point is still concerning. Both last October, when government’s action plan was introduced, and the campaign of parliamentary elections it wasn’t clarified to what that promise of 40-45% referred to. It wasn’t mentioned from which percentage that index should be reached, to be clear that we’ll reach that 45% from not 17%, but 33%.

Brackets are being opened only now, after the elections. They are opened to be clear that people, in fact, gave a rather modest promise, so that voters don’t demand much.

By Babken Tunyan