ArmInfo. In 2020, the Armenian government predicts a negative economic growth of 2% and a budget deficit of up to 5% of GDP. RA Minister of Finance Atom Janjughazyan announced on April 28 from the rostrum of the National Assembly introducing amendments to the budget for 2020, dictated by the uncertainty caused by the COVID-19 pandemic.
According to the head of the Ministry of Finance, it was impossible to predict such developments, as it was impossible to foresee unforeseen expenses. For this reason, it is proposed to amend the law, which will give the go- ahead to increase the amount of public debt and the state budget deficit. It is also planned to increase allocations to the government reserve fund. Atom Janjughazyan recalled that the Armenian economy is characterized as open and connected with the world economy. Meanwhile, the decline in world prices for metals, oil, the devaluation of the Russian ruble, and expectations for reductions in private transfers cannot but affect the country's economy. As a result, a decrease in export volumes and an inflow of financial resources is forecasted. Internal restrictions - isolation, quarantine, treatment of patients, which have led to restrictions on economic activity, also had their impact.
As Janjughazyan reminded, additional funds related to overcoming the coronavirus crisis will amount to about 150 billion drams, 25 billion of which will be aimed at direct payments to socially disadvantaged groups of the population, about 25 billion will be allocated to maintain current liquidity to the economic entities affected by the crisis, about 80 billion will be aimed at implementing long-term development programs, and 20 billion will remain at the disposal of the government as reserve funds, which, if necessary, can be spent on new measures to mitigate the situation. <The scenario that was considered today in the government is that instead of the 4.9% real growth of the economy programmed in the previous document, to envisage its negative value at the level of 2%. These are our forecasts, which suggest changes in the nominal volume of GDP and, accordingly, will be reflected in the adjustment of budget parameters. That is, we are talking about reducing the volume of the economy>, the minister emphasized. According to him, if the initial budget document provided for an absolute GDP of 7,095 billion drams, now it was reduced to 6,485 billion due to the projected decrease in budget revenues by 169 billion drams. The Minister at the same time recalled that 94% of revenues to the treasury comes from taxes, therefore, with a decrease in activity, a forecast for their loss becomes inevitable. However, according to Janjughazyan, the government intends to pursue an active counter-cyclical broad fiscal policy, within which it does not intend to cut costs, which could aggravate the situation, but rather significantly increase costs, including capital expenditures of the budget. This will become possible both through the use of non- fully spent capital investments for the past 2019 in the amount of 133 billion drams, as well as through the attraction of new loans from abroad and the domestic market of state loan obligations (bonds). The Minister noted that the government does not consider issuing new Eurobonds due to unfavorable external conditions. In this regard, the minister informed that the total amount of expenditures will make 1 855 billion drams, which is only 5 billion lower than the budgeted figure, but without taking into account last year's savings. <We decided to take a pragmatic approach to the issue, because in addition to the scenario for increasing the state debt, the country has nowhere to take funds for all the intended expenses. It was important to calculate how much our economy can absorb financial resources, finding a balance so as not to unnecessarily increase the country's debt burden on the one hand, and on the other hand, not being able to effectively spend these debt funds that need to be serviced. In any case, we remain among the countries with average debt burden, although we will increase the national debt both in absolute and in comparative terms, " Janjughazyan said.
Janjughazyan also recalled that a successful 2019 in terms of economic growth of 7.6%, led to a positive change in the structure of the economy. The growth rates of the processing industry have been outlined. The average annual inflation rate was 1.4% with an increase in the average wage level of 5.8%. Moreover, the average salary in the private sector grew more slowly than in the public sector, although so far it is 15-20% higher than the average amount in the public sector.
He also recalled that at the end of 2019, the country's national debt amounted to 7 billion 324 million US dollars, the share of government debt amounted to 6 billion 839 million dollars. The level of public debt amounted to about 50% of GDP.
According to the previously approved state budget, economic growth in Armenia in 2020 was planned at 4.9%, and inflation at 4% (+ 1.5%). At the same time, the state budget revenue item amounted to 1.69 trillion drams, expenditure - 1.85 trillion drams. The budget deficit was laid in the amount of 160.7 billion drams.
