ArmInfo. The Central Bank of rmenia in the updated forecast for 2020 expects a higher state budget deficit - 5.7% of GDP (against the previously predicted 5%), with an annual growth of 4.8 percentage points. As noted in the Central Bank's Monetary Policy Program (MCP) for the third quarter of this year, published on September 30, this level is expected in the context of a worse forecast for a decline in GDP for 2020 to 6.2% from the previous 4% (against the actual 7, 6% growth in 2019).
In terms of taxes / GDP ratio, the Central Bank forecasts a level of 22.1% for 2020 (against the previously expected 22.4%), with an annual decline of 0.2% percentage points. In an early (June) forecast, the Central Bank indicated this ratio at 22.4% - almost equal to the actual indicator of 2019, and expected a decrease in tax revenues this year by AMD 169.1 billion.
In terms of the spending / GDP ratio, the Central Bank now predicts a level of 29.4% for 2020, with an annual growth of 4.7 percentage points. In the June forecast, the Central Bank indicated this ratio at the level of 29%, with an annual growth of 4.3 percentage points, noting that 150 billion drams of the package of assistance to the economy were included in government spending.
According to the Central Bank of Armenia, a particularly pronounced underperformance is expected in 2020 in terms of capital expenditures under external assistance programs, which in the first half of the year amounted to only 19% of the planned volume, or -14.1 billion drams. The Central Bank notes that in the structure of government spending in 2020, as a result of government programs to counter the coronavirus pandemic, the share of current expenditures in comparison with capital expenditures is increasing, and current expenditures include social assistance programs and health spending.
The Central Bank, taking into account these estimates, predicts that in 2020 the impact of fiscal policy on aggregate demand will be expanding (5.7%). This is due to the strengthening of signals of an extended nature - mainly (5.1 pp) from expenditures and lending to the economy and small (0.6 pp) from income. Against this background, the Central Bank considered it appropriate to emphasize that, given the strong imbalance in the sectoral distribution of the economic consequences of the coronavirus pandemic and the nature of the overall impact of monetary policy, a stimulating and sectoral fiscal policy is becoming key to recovering gross demand. Under these conditions, according to forecasts of the Central Bank, in 2020 the national debt will also significantly increase, and the medium-term growth in the ratio of government debt to GDP will necessitate the introduction of legislatively enshrined fiscal rules in accordance with the impact on the economy.
The Central Bank's assessment of the medium-term impact of fiscal policy is as follows: in 2021 it will be moderately expanding, and in 2022-2023 it will be neutral based on the baseline scenario of the preliminary version of the medium-term spending program for 2021-2023.
It should be noted that, according to the Statistical Committee of the Republic of Armenia, the budget deficit of Armenia in 2019 exceeded $ 133 million, having decreased by 39.3% on an annualized basis (against a 60.5% decline in 2018). Budget revenues accelerated annual growth rates from 8.4% to 16.3%, while expenditures reversed from a 3.8% decline to 12.2% growth, amounting to $ 3.3 billion and $ 3.4 billion, respectively. In January-July, the deficit of the state budget of Armenia amounted to $ 216.1 million (of which 53.4% or $ 115.3 million fell in July), having worsened the dynamics before the decline by 3 times on an annualized basis - from last year's surplus to the current deficit (with the continuing acceleration of the monthly growth of the negative level) ... Budget revenues on an annualized basis decreased by 5.8% (against 23.8% growth a year earlier), amounting to $ 1.7 billion, while expenditures sharply accelerated growth from 6.1% to 20.7%, amounting to $ 1.9 billion On a monthly basis, a modest 13.3% increase in income was accompanied by a significant 37% increase in spending, as a result of which the deficit jumped 2.4 times in July.