Economist says Armenian SMEs may appear on verge of bankruptcy

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YEREVAN, June 23. /ARКА/. Small and medium-sized businesses in Armenia may appear on the verge of bankruptcy in the event of a second wave of COVID-19, Eduard Petrosyan from the Center for Research on Economic Initiatives, said at an online press conference on Monday.

According to him, the socio-economic situation will continue to worsen due to the fact that Armenia has not yet reached the peak of the disease.

“In this case, we will enter the second stage of the economic crisis – the first was when the SMEs had their debts increased; in the second stage they may appear on the verge of bankruptcy as SMEs will be hit in the first place,” Petrosyan said.

He said although the authorities lifted restrictions on economic activity from mid-May, the companies are not working at full strength yet, and given the lack of tourist flows that were important for the economy (services, hotels, restaurants), the situation is not good at all.

According to him, this means that SMEs are approaching bankruptcy, and if there is a second wave of the virus, the economic situation in Armenia will be even worse.

In case of a second wave of the virus, more systemic sectors of the economy will suffer, especially the banking sector when the business will appear on the brink of crisis and citizens will run out of resources,” said Petrosyan.

In this regard, he suggested that the government switch to austerity regime, including revising its bonus fund (about $50 million), which may not be enough for a crucial economic recovery, but this can help, as the example of many countries show.

“In order to attract investors, it is necessary to improve the investment environment, including legislatively. Financial injections will be productive only against the backdrop of a favorable investment environment, while at this stage they are unproductive and pointless,” said Petrosyan.

The next important step for the authorities, he said, is to protect socially disadvantaged segments of the population, in particular, to support as much as possible the most affected tourism companies in order to avoid mass bankruptcy.

“Today, the authorities as assistance programs have channeled into the economy only 2% of GDP (about 150 billion drams). The experience of other states shows it should reach 20-50% in order to register high-quality results,” said Petrosyan. -0-

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