Minister: The growth of the Armenian economy should be accompanied by  the strengthening of the state`s capabilities, sustainable  development and maintaining macroeconomic stability

ArmInfo.When developing the draft state budget of Armenia in 2020, many factors were taken into account, including external challenges that could affect the growth  of the country's economy. About this on October 28 at the hearings in  the parliamentary commissions on the draft Law on the State Budget of  the Republic of Armenia 2020, RA Minister of Finance Atom  Janjughazyan stated.

According to him, in particular, it is forecasted that in 2019 the growth of the world economy will amount to 3.2%, and in 2020 - 3.5%. At the same time, the processes taking  place in China will continue to have a significant impact on the  global economy, including the Armenian one. This year, it is  forecasted that China's GDP will be 6.2%, and next year - 6%.  Situation in partner countries will continue to play not least in the  development of the country's economy. In particular, in 2019,  Russia's GDP growth is projected at 1.2%, and next year - 1.9%. In  the European Union, it is expected that in 2019 the growth rate of  the EU economy will increase by 1.3%, and next year - by 1.6%.

These indicators, according to the head of the Ministry of Finance,  are also recorded in the medium-term spending program for 2020-2022.  At the same time, the indicators of the program for 2020 were  reflected in the draft state budget of 2020, which is preliminary.  The Minister recalled that the high growth rates in 2019 were  achieved, mainly due to the growth in industry and services. In this  context, Atom Janjughazyan pointed out the importance of changing  sectoral structures, which will lead to an increase in the export  potential based on high technologies. "We need profound changes in  the structure of the economy," the minister said, recalling the  projected GDP growth of the country in 2019 to 6.3%. In this context,  he emphasized the need to "stabilize growth within the existing  potential", so that economic growth is accompanied by increased state  capacity, sustainable development and maintaining macroeconomic  stability.

It is envisaged that in 2020 the nominal GDP of Armenia will grow by  approximately 529 billion drams - from 6.566.5 billion drams expected  by the end of 2019 to 7.095.1 billion drams included in the document.   At the same time, the real GDP index will reach 104.9%, against the  forecasted by the end of the current year of 106.3% and actual for  2018 105.2%. The GDP deflator will be 103%, against 102.9% for 2019  and the actual 102.5% for 2018. According to the project, the state  budget revenue item will be 1,697,618,538.8 thousand drams (1.69  trillion drams or $ 3,566 billion), the expenditure one -  1,880,186,389.8 thousand drams (1,88 trillion drams or about $ 3.95  billion), the state budget deficit will be about 153 billion drams.   State-owned tax revenues (tax revenues and state duty) are projected  at 1.602.129.712.8 thousand drams (1.60 trillion drams or 94.4% of  the projected budget revenues) instead of the planned budget for 2019  1,401,875,600.6 thousand drams, and official grants are expected to  be 33.8 billion drams (against 39.5 billion drams for 2019), other  incomes - 61.7 billion drams (against 55.1 billion drams approved for  the current year).

At the same time, in 2020, the share of tax revenues by the state  treasury will increase by 0.3 percentage points compared to 2019 - up  to 22.6%. State treasury revenues are planned at the level of 44.6  billion drams, against 39.4 billion drams approved for 2019 and  actual 37.7 billion drams for 2018. In 2020, according to the draft  budget, Armenia expects to receive from foreign states and  international organizations official grants in the amount of 33.8  billion drams, instead of 31 billion drams provided for by the  Medium-Term Expenditure Program (MTEP). This, according to the  authors of the document, is due to both adjustments to the size and  volume of the proposed amounts, and changes in calculations due to  fluctuations in the euro and the US dollar, which were the basis for  the calculation. In particular, the basis for the calculations of the  MTEP was the indicator of 486.42 and 546.54 drams per dollar and  euro, respectively, and the project already made calculations based  on the following rates - 476.17 and 522.03 drams.

In 2020, Armenia expects to receive 7.6 billion drams or 14.5 million  euros within the framework of the European Neighborhood Program for  budget assistance programs provided for by the Armenia-EU Action  Program. 55.1 million US dollars or 26.2 billion drams are expected  under the targeted grant programs. Of these, $ 10.7 million or 5.1  billion drams will be received from Russia, from the EU grants in the  amount of $ 13.1 million or 6.2 billion drams, $ 7.1 million or 3.3  billion is expected to be received from KFW under grant programs  drams, $ 2.4 million or 1.2 billion drams will be received from the  Global Fund, $ 8.1 million or 3.8 billion drams are expected from the  European Bank for Reconstruction and Development, $ 1.9 million or  0.9 billion drams from the European Investment Bank for implementing  the North-South Road program (tranche-3), the World Bank will provide  grants in the amount of $ 2.8 million or 1.3 billion drams and  another $ 9 million or 4.4 billion drams expected from other donors. 

Armenia plans to receive 61.7 billion drams from other incomes in  2020, 30.6 billion drams from them through extrabudgetary programs,  against 55.1 billion drams for the current year and 72.4 billion  drams for 2018.

Repayment and servicing of the government debt of Armenia in 2020  will cost the state treasury $ 1.355 billion. At the same time, as  expected, the nominal GDP in the conditions of 4.9% of economic  growth will increase by approximately 529 billion drams - from  6.566.5 billion drams expected by the end of 2019 to 7.095.1 billion  drams or about $ 14.9 billion (the calculated exchange rate of the  Armenian dram to the dollar is 476.17 drams) laid down in the draft  law "On the State Budget of the Republic of Armenia for 2020". Thus,  according to forecasts laid down in the basis of the document, the  state debt of Armenia by December 31, 2019 will amount to 3.538  trillion drams ($ 7.430 billion) or 53.9% of GDP. By the end of 2020,  the indicator will reach 3.705 trillion drams ($ 7.780 billion), or  52.2% of GDP. At the same time, by December 31, 2020, government debt  will amount to 3.490 trillion drams ($ 7.330 billion) or 49.2% of  GDP, thus decreasing by 1.1 percentage points from the expected by  the end of 2019 3.305 trillion drams ($ 6.940 billion) or 50, 3% of  GDP. According to the results of 2020, the debt of the Central Bank  will amount to 214 billion drams ($ 450 million) or 3% of GDP,  against the expected by the end of this year 233 billion drams ($ 490  million) or 3.5 GDP. At the same time, the Armenian financial  authorities plan to increase domestic debt from 780 billion drams or  $ 1,639mln (11.9% of GDP) in 2019 to 12.9% of GDP or 916 billion  drams, $ 1,923mln (against the actual for 2018 672 billion or $ 1,390  million, 11.2% of GDP).

And, if from 2009 to 2016 on average 4.2% of state treasury expenses  were directed to pay interest payments, already in 2017 the indicator  increased to 8.1%. In 2018, interest was paid to pay interest  payments 139 billion drams (instead of the actual ones for 2017,  122.1 billion drams), namely 75 billion drams for external debt and  64 billion drams for internal debt. In 2019, according to the  indicators laid down in the approved budget, Armenia will direct  about 356.9 billion drams ($ 733 million), or 9.6% of the state  treasury expenses, to repay and service the government debt. In  particular, out of 356.9 billion drams, 198.9 billion drams were  planned to be allocated for paying off the main amount of the debt  (85.2 billion drams for external debt and 113.7 billion drams for  domestic debt), and 158 billion drams for paying interest payments.

As a result, according to the document, the repayment and servicing  of the government debt of Armenia in the next year will require 453.9  billion drams (about 953.5 million). In particular, 284.7 billion  drams (about $ 598 million) of them will be allocated to pay off the  principal amount of the debt (123.4 billion drams will be used to pay  off the domestic debt, and 161.3 billion drams - on the external  debt). About 9% of state treasury expenses or 2.4% of GDP in the  amount of 169.2 billion drams ($ 355.48 million) will be allocated  for the payment of interest payments (85.6 billion drams will be used  to pay interest payments on the domestic debt and 83.6 billion drams  - external). As a comparison, we note that in 2020 the budget  allocations for education and science will amount to about 160  billion drams, healthcare will receive 110 billion drams.

Armenia should also send about $ 402 million to repay the first  tranche of Eurobonds, which was scheduled for September 30, 2020. The  financial authorities have already decided the issue by issuing the  third tranche of Armenian sovereign securities. On September 19,  Armenia announced the issue of 10-year Eurobonds in the amount of $  500 million, the organizer of the issue opened a order book for $ 500  million with an initial yield of 4.625% per annum. But a significant  prevalence of demand over supply - by more than 5 fold - led to a  decrease in the yield rate to 4.2% per annum, and the coupon rate was  3.95%. The main underwriters were J.P. Morgan Securities plc. and  City bank. The RA financial authorities have already bought out  Armenian liabilities on the first tranche of $ 402 with these funds,  and sent $ 98 million to the Stabilization Deposit Fund.  According  to the results of 2020, according to the source, the World Bank (WB)  represented by the International Development Association (IDA)  continues to remain the largest external creditors of Armenia, which  accounts for 39.4% of external loans and another member of the WB  group - the International Bank for Reconstruction and development  (IBRD). The list of large creditors also includes the Asian  Development Bank (ADB) with 19%, the Eurasian Development Bank (EDB)  - 7.3% and the European Investment Bank with 3.5%. Among the  countries of creditors Russia is the leader - 10.5%, Japan - 4.8%,  Germany - 5.8% and France - 2.9%, followed by China and the USA - in  the amount of 0.5% and 0.3% respectively.