Ministry of Finance of Armenia forecasts GDP growth at the level of 4.7% for 2018 with an acceleration to 5.7% in 2020

ArmInfo. The Ministry of Finance of Armenia forecasts GDP growth in 2018 at 4.7%, in 2019 - at 5.4%, in 2020 - at 5.7%. The Armenian government's decision on July 6 approved the medium-term expenditure program of the Republic of Armenia for 2018-2020, which is an integral part of the overall budget process and will become the basis for the development of the state budget for 2018. The program outlines the priorities of the fiscal policy and the state spending strategy for the next three years for the state administration and society. The Minister of Finance of Armenia Vardan Aramyan presented the document.

The head of the Ministry of Finance once again recalled that the year 2016 was the year of external shocks impact on the country, as a result of which the year was summed up with a 1.1% deflation, to which the Central Bank, in turn, reacted by lowering the basic REPO rate on 2.5 pp In the future, the Cabinet's steps will be aimed at maintaining the inflation rate within 4% (+ 1.5%), as well as maintaining a flexible exchange rate regime with minimal intervention if necessary from the Central Bank.

According to Vardan Aramyan, 4 basic principles were taken into account when drafting the program. First and foremost, this is stabilization and further decline in the level of public debt to GDP, which has increased by 13 pp over the past three years. According to the second principle, the government is aimed at increasing its own revenues to current expenses. Thirdly, the Government wants to increase capital expenditures in comparison with the deficit. Thus, as the minister said, the government's external loans will be directed exclusively at capital expenditures to strengthen the economic foundation of the country. "As international practice shows, borrowing is not terrible if you are directing borrowed funds to strengthen the economic base, which leads to further GDP growth," Aramyan said. Under the fourth principle, taking into account the aggressive growth in tax revenues in 2017, the Ministry of Finance expects an increase in the tax/GDP ratio by an average of 0.5 pp.

Concerning the main macroeconomic indicators, the head of the Ministry of Finance stated that the nominal volume of GDP in 2018 will be 5.785 billion, in 2019 6.341 billion, and in 2020 the figure will reach 6.974 billion. GDP growth in the next 3 years will be provided by an aggressive increase in the capital expenditure to GDP ratio: in 2018, they will increase to 3.8% of GDP, in 2019 the figure will be 4.8%, and in 2019 - 5.5%. The level of the budget deficit will gradually be reduced and in 2018 will decrease from 2.8% of GDP to 2.7%, in 2019 - to 2.4%, and in 2020 - to 2.1%.

"The Armenian government has ambitious plans to increase its own revenues, as well as fairly rigid management of stable expenditures and hard-to-reach slats on the ratio of taxes/GDP, on external debt, budget deficit, and this will require the most coordinated work from all of us," said the prime minister of Armenia Karen Karapetyan.

According to statistical data, in January-May 2017 economic activity grew by 6.4% per annum. Drivers of growth were industry, services and the trade sector. Foreign trade turnover in this period increased by 23.1%, in particular, exports by 20.9%, and imports - by 24.4%. Armenia's national debt reached $ 6.1 billion by June 2017, of which external debt was $ 4.9 billion and domestic debt $ 1.2 billion. In the annual analysis, Armenia's national debt grew by 15.1%, including external debt by 11.4%, and domestic debt - by 50%.

To note, the World Bank predicts GDP growth in Armenia in 2017 by 2.7% with the acceleration of the rate in 2018 to 3.1%, in 2019 - up to 3.4%. According to the IMF forecast, Armenia's GDP growth in 2017 will be 2.9%, according to the EDB forecast - 2.9% and the Asian Development Bank - 2.2%. The state budget of Armenia for 2017 laid the GDP growth by 3.2%, but the government voiced a 5% growth.  According to the updated forecast of the Central Bank of Armenia, the GDP growth of Armenia in 2017 will be 3.2-4.4%. Fitch Ratings has improved the forecast for GDP growth in Armenia in 2017 from the previously expected 2.1% to the updated 3.4%, with the acceleration of the rate in 2018 to 3.6%.