Wednesday, April 1 2020 20:36
Karine Melikyan

Forecast by CBA: the ratio of budget deficit to GDP in 2020 will be  3%, and in case of full implementation of the anti-crisis package it  can reach 5.3%

Forecast by CBA: the ratio of budget deficit to GDP in 2020 will be  3%, and in case of full implementation of the anti-crisis package it  can reach 5.3%

ArmInfo. According to the forecast of the Central Bank of Armenia for 2020, the ratio of the state budget deficit to GDP will be 3% (against the actual 1% in 2019 with  a y-o-y decline of 0.9 percentage points), and if the announced  volume of the anti-crisis assistance package does not change and will  be fully implemented during the current year, this ratio can reach  5.3%.

As noted in the Central Bank's Monetary Policy Program for the  first quarter of this year, this level is expected under the  conditions of a worsened forecast for GDP growth for 2020 to a  stagnant 0.7% (against the actual 7.6% growth in 2019).

In terms of the ratio of taxes / GDP, the expectations of the Central  Bank are restrained - it is forecasted to be equal to the actual  indicator of 2019 at the level of 22.3%, and the ratio of expenses /  GDP will be 26.7% with a y-o-y increase of 2 percentage points (pp).

Conservative estimate of the Central Bank regarding taxes takes into  account the impact of the coronavirus pandemic on the global economy  and the Armenian economy, the uncertainties associated with the  proposed structural changes. According to the forecasts of the  Central Bank, the nominal GDP is expected to be lower than the  legislatively fixed indicator, and in terms of growth rates it will  be significantly lower than the Central Bank's earlier forecasts,  under which a restrained approach to the tax / GDP ratio implies a  lower tax collection than was planned for the current year budget.

As regards expenditures, based on the results of the state budget in  previous years and in the first quarter of 2020, savings of almost 3%  (about 65 billion drams) are expected, mainly with regard to programs  implemented through external financing.

"It should be noted that as of March 17, the government's  expenditures did not include changes approved by the government's  decision related to the preparation of an anti-crisis assistance  package. Only general amounts of expenditures and main directions are  known, but distribution mechanisms are not specified yet, and without  this it is difficult to assess the degree of additionally stimulating  effect of fiscal policy in the current uncertain conditions ", -  noted in the forecast report of the CBA.

It should be noted that according to the WB's early forecast  regarding the state budget of Armenia, the deficit / GDP ratio was  expected to reach 2% in 2020 (there is no new forecast yet).

According to the RA Statistical Committee, the budget deficit of  Armenia in January-December 2019 amounted to 63.9 billion drams ($  133.1 million), decreasing by 39.3% year on year, against the 60.5%  decline in 2018. The budget revenues of Armenia accelerated the  annual growth rate from 8.4% to 16.3%, while expenditures unfolded  from a 3.8% decline to a 12.2% increase, amounting to 1.559 trillion,  respectively and 1.623 trillion drams ($ 3.2 billion and $ 3.4  billion). In the structure of revenues, the share of taxes and duties  increase year on year (2019 to 2018) slightly - from 93.8% to 93.9%,  in absolute terms, increasing by 16.4% to 1.464 trillion drams or $ 3  billion (versus 8.6% growth in 2018). Armenia's GDP accelerated  annual growth in 2019 to 7.6% from 5.2% in 2018, reaching 6.552  trillion drams ($ 13.6 billion).

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