Armenia’s economic statistics and reality differ — Alpha Economics

Armenia’s GDP grew by 6.2% in the third quarter. Since GDP is a more comprehensive measure of economic growth than the economic activity index (the latter being an operational indicator), one could certainly say that the statistics look good, and moreover, it can be assumed that the year-end results will also be positive.

Of course, strong statistics and genuinely positive assessments of the economy are not the same thing. To see the difference, it is enough to ask which sectors and factors drive GDP.

In general, there is a certain “natural correlation” between statistics and reality, but it ceases to be natural when the gap widens. That is exactly the situation we face today.

Another picture that provides a realistic assessment of the real sector of the economy can be seen in the statistics of banking sector financing. Which sectors are financed—in other words, which are attractive to financial players? As of June 30 this year, the majority of loans, totaling about 6.5 trillion drams, are directed toward mortgages and consumer lending.

For example, the agricultural sector received only 5.7% of total loans, while manufacturing accounted for 5%. Meanwhile, mortgage lending made up 23.7% of the total, and consumer lending 24.5%. Together, these two areas account for 48.2% of all lending.

As a rule, banks lend to sectors where there is demand and profit; in other words, where they see interest. Banks are commercial organizations focused on generating profit, so the issue does not lie with them. Even setting aside the reasons for the lack of attractiveness of other sectors, this data alone shows that Armenia’s real economy is in a problematic state.

This situation requires diversifying the structure of the economy, identifying and assessing existing problems, and taking real measures to address them so that the gap between economic statistics and the real sector does not become unnatural.