Saturday, September 27, 2008

Tightening credit in Armenia?

By now the readers of this blog might know that the biggest threat to the well being of the economy of the US, and by proxy, the rest of the developed world, is the tightening of the credit markets. Credit, i.e. loans to businesses and consumers, is the lubricant that keeps the wheels of the markets rolling. The reason for the tightening of credit is the lack of confidence in the marketplace. The creditors like the banks (both investment and commercial banks) or private holders of debt do not have confidence that their loans are going to be paid back. You can read the text of Bush's speech about the crisis here: it's a well designed speech for the general audience.

What does it mean for Armenia? Armenia is a tiny economy with a GDP of a small city in the US and has no impact on anything. Until now the administrators of the Armenian economy claim that Armenia is immune to the pressures in the global marketplace...

The whole economy is based on the flow of money from abroad. A man working in Russia will still do everything possible to send money to his family even if it means to work harder and stay hungry at night. The same goes with people working in other countries around the world who send remittances to their families in Armenia. But it can go only so far. As people in these countries see their salaries shrink or even lose jobs, they will physically be unable to generate enough income to be able to send it home. Add to that the friction between Armenia and Western Union and you have a recipe for some loss of confidence.

Well, here is a snippet in Haykakan Jamanak that describes an Armenian version of tightening credit in the country. It could the first signs of something serious.

I just hope that the foreign transfers do not diminish too much to bring about a catastrophic economic collapse.
ՃԳՆԱԺԱՄԸ ԹԱԿՈՒՄ Է ԴՈՒՌՍ

Մեր ունեցած տեղեկություններով, հայաստանյան որոշ բանկերում լուրջ խնդիրներ են առաջացել "ազատ" միջոցների հայթայթման առումով: Մի քանի բանկեր այլեւս հրաժարվում են հիպոտեկային վարկեր տրամադրել, իսկ առեւտրային վարկերի պարագայում բարձրացրել են տոկոսադրույքները եւ կրճատել ժամկետները: Մեր բանկերում առաջացած այս խնդիրը բանկիրները մասամբ պայմանավորում են միջազգային ֆինանսական ճգնաժամով, մասամբ էլ ներհայաստանյան տնտեսական իրավիճակով: Բանկերից ահազանգում են նաեւ, որ զգալիորեն կրճատվել են արտասահմանից իրականացվող մասնավոր փոխանցումների ծավալները:

1 comment:

spm said...

Nazarian, I have a funny/serious observation in that regard. I 've been looking for a condo or small house in Glendale last couple of months (for someone else). Guess what? There are no free or abandoned properties in Armenian populated areas of LA. The prices has not been reduced there or not substantially as in neighboring mexican populated areas. On the other hand dram/dollar ratio never followed international trends. There is an impression that either Armenians do not participate in the world economy or pretend they live on a different planet. So much about globalization :-)