How decrease in oil prices threatens Armenia - economist's opinion
12.03.2020,
17:55
Decrease in oil prices could reduce exports from Armenia and drive unemployment rate up, Anna Makaryan, an economist and analyst at the Center for Economic Development Initiatives, said at a news conference on Thursday. The expert noted that changes in oil prices will have some impact also on Armenia, which will be visible somewhere.
YEREVAN, March 12. /ARKA/. Decrease in oil prices could reduce exports from Armenia and drive unemployment rate up, Anna Makaryan, an economist and analyst at the Center for Economic Development Initiatives, said at a news conference on Thursday. The expert noted that changes in oil prices will have some impact also on Armenia, which will be visible somewhere.
"The first is through Russia: the impact on their economy will reach also Armenia. Due to the depreciation of the ruble, remittances will be reduced, and since part of the goods are exported and sold in rubles, therefore, this will also affect the volume of exports," she said.
The economist said that the decline in oil prices is associated not only with the disruption of the deal between Russia and OPEC, but also with the coronavirus, which, in turn, leads to a decrease in energy consumption. According to her, this in turn leads to a decrease in world prices for ore, which will have a significant impact on the Armenian economy.
"The extracted resources accounted for about 30% of the export structure of Armenia, of course, a fall in prices will affect export volumes," Makaryan said. However, she noted that Armenia can react to this situation in several ways. “If we consider social assistance programs, we see that unemployment benefits, the most effective tool used in the world, is absent in Armenia. There are social assistance programs, community service, but it takes time to implement them,” the economist said.
She also said that one of the mechanisms to combat the negative impact on the economy is to increase public debt, particularly internal. "An important circumstance is that the domestic demand is the driving force for the Armenian economy. In this case, however, the impact of outside factors will lead to a reduction in the population's spending and GDP. But the fact that dependence on foreign markets is small is a good indicator from the point of view of crisis resilience,” the expert said.
Makaryan pointed out that consumer lending has grown significantly, and since reductions are likely, the number of bad loans may increase.
The main cause of the sharp decline in the cost of oil was the news of the failed negotiations in Vienna to reduce oil production. The countries included in OPEC + on March 6 could not reach an accord. In particular, the new proposal of the alliance (to tighten the belt tighter) did not suit Russia.
Moscow seeks the extension the concluded deal for another three years on the conditions that are currently in force. A day later, Saudi Arabia announced that it would build up oil production in April. The kingdom also promised a 20-percent discount on its oil. Experts say these actions are aimed at weakening Russia's position in the global oil market. -0---
"The first is through Russia: the impact on their economy will reach also Armenia. Due to the depreciation of the ruble, remittances will be reduced, and since part of the goods are exported and sold in rubles, therefore, this will also affect the volume of exports," she said.
The economist said that the decline in oil prices is associated not only with the disruption of the deal between Russia and OPEC, but also with the coronavirus, which, in turn, leads to a decrease in energy consumption. According to her, this in turn leads to a decrease in world prices for ore, which will have a significant impact on the Armenian economy.
"The extracted resources accounted for about 30% of the export structure of Armenia, of course, a fall in prices will affect export volumes," Makaryan said. However, she noted that Armenia can react to this situation in several ways. “If we consider social assistance programs, we see that unemployment benefits, the most effective tool used in the world, is absent in Armenia. There are social assistance programs, community service, but it takes time to implement them,” the economist said.
She also said that one of the mechanisms to combat the negative impact on the economy is to increase public debt, particularly internal. "An important circumstance is that the domestic demand is the driving force for the Armenian economy. In this case, however, the impact of outside factors will lead to a reduction in the population's spending and GDP. But the fact that dependence on foreign markets is small is a good indicator from the point of view of crisis resilience,” the expert said.
Makaryan pointed out that consumer lending has grown significantly, and since reductions are likely, the number of bad loans may increase.
The main cause of the sharp decline in the cost of oil was the news of the failed negotiations in Vienna to reduce oil production. The countries included in OPEC + on March 6 could not reach an accord. In particular, the new proposal of the alliance (to tighten the belt tighter) did not suit Russia.
Moscow seeks the extension the concluded deal for another three years on the conditions that are currently in force. A day later, Saudi Arabia announced that it would build up oil production in April. The kingdom also promised a 20-percent discount on its oil. Experts say these actions are aimed at weakening Russia's position in the global oil market. -0---
