EDB says Armenia’s accession to customs union to have positive effect on its economy

EDB says Armenia’s accession to  customs union to have positive effect on its economy

YEREVAN, January 16 /ARKA/. Armenia’s accession to the Customs Union (CU) and the Single Economic Space (SES) will have a positive effect on the country’s economy, reads the report titled as Armenia and the Customs Union: Assessing the Economic Effect of Integration published by Eurasian Development Bank’s (EDB) Center for Integration Studies. 

Quantitative analysis of the consequences of Armenia’s accession to the CU shows that the additional growth of the country’s GDP will stand at about 4% if it opts for integration. The trade benefits from a lower price for Russia’s gas alone will be $140 million per year, which is comparable to a GDP growth of $146 million which the country is expected to get from the association agreement with the EU in the long term.

The research reads that integration with the CU and the SES is preferable regardless of which economic development strategy the country opts for: improving the domestic demand or choosing an export-oriented development. After becoming a full-fledged member of the CU and the SES Armenia will be able to effectively address pressing social and economic issues and achieve sustainable and balanced economic growth.

According to the experts, one of Armenia’s major benefits from acceding to the SES is access to the common labor market. The SES agreements in the area of labor migration are aimed at providing national treatment for labor migrants and ensuring the effective operation of the common labor market. “Some 85% of remittances currently come from labor migrants in Russia (15% of Armenia’s GDP). Accession to the SES agreements will increase the amount of remittances by $40 million per year. This will help to stably finance the trade account of the country’s balance of payments,” the experts note.

Thanks to the free movement of goods and capital in the SES the country will get access to a large market with protection mechanisms. At the same time more investment will pour into both SES-oriented sectors and the country’s domestic market. As a result, export-oriented branches of Armenia’s economy will be given a boost to development. The country will get an opportunity to advance the solution of its strategic problems such as transport isolation and the need to improve its energy potential. Armenia’s most promising infrastructural projects in which investors from the SES could partake are the construction of a new nuclear power plant and other projects in the energy sector along with the construction of a railway to Iran, the North-South transport corridor and the resumption of rail communication with Russia through Georgia.

It is particularly important that both Armenia and other member states of the CU and the SES are interested in these initiatives because the implementation of the projects to create and develop rail and road transport corridors to South Asia and the Middle East will link these markets with the CU countries. The construction of electric power grids in the direction of Iran is another promising area of development.

The report also touches upon Armenia’s foreign trade potential. It reads that the country will have to sharply improve the protection of its market to meet the CU standards (Armenia’s current average weighted import customs tariff is 2.7%, while in the CU the 2014 tariff will stand at 6.9%). The increase in customs duties will result in the decrease in the budget deficit but will trigger the WTO-based adjustment procedures, the experts underline. 

The Eurasian Development Bank is an international financial institution founded by Russia and Kazakhstan in January 2006 with a view to assisting the development of market economies of the member states while facilitating their sustainable economic growth and expanding their mutual trade and economic ties. The EDB’s authorized capital exceeds $1.5 billion. Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan are members of the EDB. -0-


14:44 16.01.2014

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