Finance Minister of Armenia: We could raise pensions and salaries, but it would jeopardize the country`s economic growth and stability

ArmInfo. Finance Minister of Armenia Vardan Aramyan said the Government decided not to raise salaries and pension to ensure economic growth. The draft budget 2017 envisages no rise in salaries and pensions.

"We could raise pensions and salaries to have a short-term effect, but it would jeopardize the country's economic growth and stability. In the future, economic growth will enable us to increase salaries regularly," Aramyan said.

The draft budget 2017 envisages a 5% or 5,405bln drams nominal growth of GDP. According to the minister, the progressive economic growth in Armenia in 2017 will depend on both restoration of the Russian economy and the growing copper price in the world market and the fiscal and monetary policies of the Armenian government. In this light, Aramyan said, the economic growth will average 3.2% with a 1.7% index-deflator (this year, it will make up about 2.4%, the ministry said), and 150.1bln drams deficit.

According to preliminary data, the country will see about 300bln drams budget deficit in 2016.  Taxes and duties totaled 21.7% of GDP (less than 24.5% in 2015). In 2017, it is anticipated that this indicator will increase by 0.4 percentage points, specifically due to gambling and betting duties and taxation and customs administration (by 0.2 percentage points each). It is anticipated to finance the budget deficit in 2017 at the expense of domestic receipts - 71.1bln drams, of which 45bln drams will be ensured though issue of government bonds and return on loans, as well as 79bln drams foreign financing.  GDP deflator will not be calculated this year, but in 2017 this indicator will total about 101.7%. Inflation will total 2.4% for 12 months, and 1.4% in average. The economic growth will be ensured due to 5.5% growth in the industrial sector, 4% growth in the agricultural sector, 2.8% in the service sector, 3% growth in indirect tax collection. As for the construction sector, no growth is envisaged in 2017 (1.5% decline this year).   

According to the minister, the budget revenues 2017 will be increased by 27bln drams up to 1.210bln drams, with expenditures to be curtailed by 13bln drams to 1,360bln drams (about $28.7bln at the current exchange rate) (22.5% incomes-to-GDP ratio).  In the budget of 2016, 1trln 186.3bln drams were envisaged (21.8% incomes-to-GDP ratio). Tax revenues and state tax will total 1,135bln drams of the budget revenues (1.065bln drams in 2016), official grants will total 31bln drams (35.1bln drams in 2015), and other incomes to total 44bln drams (25.8bln drams in 2016).     

The second principle the state budget is based on is the debt stability and the fiscal policy, the minister said.  According to him, in 2014-2015, a high level of the state deficit was registered in Armenia - 4.8%.  The deficit will reach 5.9% by the end of the year, Aramyan said defining as the main source of the debt. "As a result, the debt increased from 43.7% in 2014-2015 to 54.4% by the end of the year," Aramyan said.  Consequently, we must be more conservative not to let the debt to grow. We were relatively conservative when it came to expenses. The budget expenditures are envisaged at 1trln 360bln drams, of which 1.264.4bln drams or 93% are current expenses, 95.9bln drams or 7% are expenses on non-financial assets.  In such situation, the deficit of the budget 2017 will be below 2.8%, nearly half as much as this year.