Central Bank forecasts budget deficit drop to 2.6% of GDP in 2018

ArmInfo. According to the forecast of the Central Bank of Armenia, the ratio of the state budget deficit to GDP in 2018 will decrease by 2.2 percentage points - up to 2.6%, against 4.8% in 2017 and 5.6% in 2016. This was noted in the program of the monetary policy of the Central Bank for the first quarter of 2018, published in late February.

Armenia's Central Bank notes that, despite the expected deficit reduction, the impact of fiscal policy on gross demand in 2018 will be increased by 0.9 percentage points. Such influence is entirely conditioned by the expanded impact of spending and lending, which will be observed during the three quarters of this year.

The ratio of budget revenues to GDP will increase by 0.1 percentage points in 2018, while the ratio of budget expenditures to GDP is reduced by 2.1 percentage points. The Central Bank notes that a reduction in the level of the shadow economy and tax reforms will allow maintaining the ratio of taxes to GDP at the level of 2017 (20.8% on statistical data).

In 2017, the Central Bank predicted the ratio of taxes to GDP at 21.2%, the ratio of state budget expenditures to GDP - at the level of 25.6%. The impact of fiscal policy on gross demand in 2017 was assessed as constraining by 2.9 percentage points. In the medium term, to stabilize the debt, the fiscal policy will be aimed at a gradual reduction of the deficit - on average, to 2.4% of GDP. In 2019-2020 is expected to neutralize the impact of fiscal policy. The current account deficit was projected for 2017 in the range of 2-3% of GDP.  According to the National Statistical Service of Armenia, the budget deficit of Armenia in 2017 decreased by 4%, against growth of 13.4% in 2016. In particular, budget revenues accelerated the annual growth rate from 2.1% to 5.6%, while expenses, on the contrary, slowed the growth from 4.1% to 3.8%. The GDP growth rate of Armenia accelerated in 2017 to 7.5% from 0.2% in 2016. The GDP deflator index in 2017 was 102.2%, against 100.5% in 2016.