ArmInfo.The government started to increase expenditure (especially capital expenditure) in March-June 2020.
According to the research prepared by Ameria CJSC Consulting company As response to Covid-19 outbreak and overall lockdown, the expenditure of Government increased. In the first half of 2020 the expenditure of Government grew up by 20.2% vs 2019m6 and by 25.4% vs 2018m6. However, semi- annual performance of planned budget expenditures amounted to 82.6%.
Around 17% of total expenditure growth in 2020m6 is explained by "Capital expenditure". This is quite significant as share of Capital expenditure in total expenditure in 2019m6 was only 3.7% (in 2020m6 5.2%).
''The Capital expenditure will increase all over the year, but its growth rate will be slowed, as the government had significantly increased capital expenditure also in second half of 2019. The government tries to increase expenditure (more Capital expenditure) during 2020, but it is a big challenge as revenues are decreasing. Additional means (including new debt) are necessary to finance the expenditure. As mentioned above, the increase "Capital expenditure" has been quite sharp, which is a natural response by the state to support decreased demand during the crisis, but this expenditure amounted to 39.4% of the planned half-year budget, which means that more than half of what was planned was not fulfilled.
In Georgia, for example, in the first half of 2019 the share of "Capital expenditures" in total expenditure was 17.8% (already significantly higher compared to Armenia), and in 2020-6m it increased by 1.1 pp., while, as already mentioned, in Armenia, in the first half of 2019 the share of "Capital expenditures" was 3.7%, and in 2020 6m it increased by 1.5pp reaching to 5.2%. Although there are many factors to consider when analyzing "Capital expenditures", such as efficiency for instance, however the current level of "Capital expenditures" in Armenia are low to alleviate the crisis of the economy; the primary priority is to increase "Capital expenditures".
According to 2020m6 expenditure structure by functional classification: The government increased significantly the spendings on Healthcare (54%), Defense (47%), Education (24%) and Social protection (20%). The categories that have small share in total expenditure have been decreased: "Construction" (-49%), the share of these spendings decreased by 0.4pp vs 2019m6, Environment protection (-36%). As of June 30, 39.9 bln AMD was allocated to businesses and households: of which 39.0% focused on Economic impact 36.2% =on Social impact, the rest is Complex events.
