New wave of price hike hits Armenia
By Mushvig Mehdiyev
Last week, Armenia saw a price hike in its consumer market. This brought new waves of anxiety about inflation.
Such a concern is quite understandable for a country with poor economy mostly depending on neighboring Russia.
The post Soviet country is closely interrelated with Russia, which is currently facing challenges because of Western sanctions. Drawbacks on the markets and forecast slowdown in economy promise nothing good.
Russia has announced that its markets has been open to Eastern traders since breaking its ties with the Western countries due to "sanction war".
Armenian government tried to benefit the situation to enter the Russian markets but unfortunately it did not correctly predicted its adverse effects.
Markets have their own rules and sometimes they are unexpectedly severe. Drop in supplies to domestic markets due to increase of exports naturally evolves price hike, which is indeed undesirable, but inevitable. Empty markets will undoubtedly weaken Armenia's tough economy and promote social dissatisfaction.
Analysts say Armenia's dependence on its northern neighbor will increase amid the country's perspective joining the Russia-lead Eurasian Economic Union and will hardly improve its weak economy.
The reigning economic crisis in Armenia has sparked mixed reactions in the society regarding the future of the country. Some residents opt for joining unions, while others support standing apart from any alliance.
"Neither European Union, nor Eurasian Economic Union is beneficial for Armenia, both of them are harming," Head of the Association of Consumers Public Organization Armen Pogosyan said.
Pogosyan believes that price hike in Armenia will be inevitable in case of its membership in both alliances. He added that both cases will create many problems for the country, as it fails to provide equal conditions of competition. Consequently, it will end in unavoidable price hike in Armenia.
He also noted that the price hike recorded in Armenia exceeds the country's economic growth. Total prices climbed up by roughly 5 percent last year, while prices of food products surged by 14 percent. "Prices continue to go up, we hope it will not surpass the current index," Pogosyan said.
Pogosyan noted that the price hike will not affect 12 percent of Armenian population, while 88 percent of the residents will seriously feel the results of the increasing prices. He said the price rise will double to be 11 percent after entering into the Eurasian Economic Union.
Armenia's current economic crisis which is characterized by the price hike and slow growth has triggered a disorder in the country. Decreasing purchasing power and deficiency of enough products on the markets have urged merchants to play dirty tricks on people.
Armenia's State Service for Food Security revealed a large quantity of expired food products at the trade centers and public catering facilities. Some 34 facilities have been fined for selling outdated products.
One third of Armenian population live in poverty so that they can't earn even their daily nutrition intake. Poor people will hardly withstand the new wave of price hike against the backdrop of the country's collapsing economy.
World Economic Forum's (WEF) Global Competitiveness Report 2014-2014 ranked Armenia 85th among 144 countries. Armenia dropped 6 points compared to the same report last year.
Moody's has recently revised the growth forecast of the GDP in Armenia from 3.2 percent to 2.1 percent in 2014 and from 3.6 percent to 2.3 percent in 2015.
In recent years, Armenian economy has not seen any foreign investment due to bureaucratic barriers and non-transparent regulations, according to the 2014 Index of Economic Freedom.