Yesterday I read an article that explained the European Bank for Reconstruction and Development (EBRD) is forecasting a whopping 10 percent growth in Armenia’s GDP for 2010. That’s right, 10 percent. And that’s up from a previous estimate of 2 percent.
Why? According to the EBRD press release, the high amount of cash expected to flow into the country from loans and remittances this year is to account for the growth. This means Armenia’s economy is still internationally acknowledged to be chiefly dependent on foreign aid, nothing more. Armenia’s financial situation is clearly not rock solid if it needs to rely primarily on a constant cash influx in order to survive.
Here’s what the report stated:
Armenia has seen an exceptionally sharp output contraction as remittances fell, and the remittances-fuelled construction boom came to an abrupt halt. Preliminary data suggest that vigorous growth has returned in recent months following growth in remittances, an agreement on an IMF programme and substantial financing from other IFIs and bilateral donors.
Contrary to what I used to speculate, there doesn’t seem to be any near-term or long-term concern for Armenia’s economy to flounder, so long as the cash continues to pour in. Naturally, this isn’t necessarily good. Armenia needs to ultimately figure out how it can become self-sustainable without the reliance of foreign assistance that can’t possibly last forever. The country’s economy needs to stand solid on its own two feet and not depend on crutches indefinitely, and that’s a huge challenge. But there doesn’t seem to be any concern about that. Armenians are simply not worried about the bottom dropping out. But is that a bad thing?
Photo credit: Leonardini
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