EBRD: Armenia needs substantial reformation of its business climate

YEREVAN, March 6. /ARKA/. Armenia, which has no access to sea and limited access to neighboring markets, needs substantial reformation of its business climate, enhancement of competition and improvement of physical infrastructures, the European Bank for Reconstruction and Development (EBRD) said in its transition report for 2012. 

According to the report, long-term growth prospects remain uncertain. The country’s economy, which is singled out for relatively high degree of monopolization, remains reliant on export of raw materials with low added value, which makes it vulnerable to shocks experiences by its trade partners.    

The EBRD stressed in the report that economic prospects for the nearest future are overshadowed by uncertainty across the world, and to retain economic growth close to 4% in 2012 and 2013, it will be necessary that amounts of money transfers remain large and demand from foreign partners, particularly Russia, as well as prices for exported raw materials remain high.    

The EBRD experts say in the report that recovery of Armenia’s economy after the recession has already speeded up and that the growth is mainly propelled by mining and processing industries. 

The country’s unreformed agriculture recovered after the 2010 decline thanks to a better weather and growth in money transfers. 

Construction rallied as well after flagging in 2009. 

The EBRD says in its report that the government continues efforts to consolidate the budget for retaining the state debt at an acceptable level under the IMF-supported program. 

Growth in lending was considerable and it reflected a low level of financial mediation.

    

External imbalances were downed, but current account adverse balance remains high standing at 11% of GDP.  

The EBRD experts single out the necessity of a breakthrough in improvement of business climate among the 2013 top-priority objectives. 

It is also necessary to stimulate domestic and foreign trade by modernizing transportation and communication infrastructures, which will spur development of export-oriented segments of the national economy and will reduce implicit costs in dealings.  

 

The EBRD also recommends the government to continue efforts for development local capital markets. 

The large-scale objective to de-dollarization of the economy should be accompanied by a consistent transition of monetary policy from actual conjunction with foreign exchange rate to inflation targeting. 

The pension reform to be implemented by the government should open strategic opportunities for development of domestic markets of securities, bank deposits and equities thanks to institutional investors’ base, which ensures sustainable demand for long-term investments. -0-