Thursday, October 1 2020 13:51

Central Bank of Armenia predicts higher state budget deficit for 2020  - 5.7% of GDP

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.


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10 billion

Volume of T-bills for placement

200 million

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200 million

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200 million

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Объем (инвал.)

200 000

0бъем (драм)

96 400 000