ArmInfo. In the updated forecast for 2020, the Central Bank of Armenia expects a higher state budget deficit - 6.2% of GDP (against the previously predicted 5.7%), with an annual growth of 4.8 percentage points.
In 2021, this figure will decrease by 1 percentage point, under conditions of which fiscal policy will be somewhat restrained, which will reduce government debt and ensure fiscal stability in the medium term. As noted in the Central Bank's Monetary Policy Program for the Q4 of this year, published on December 29, this level is expected in the context of a worse forecast for a decline in GDP for 2020 to 7.2% from the previous 6.2% (against the actual 7.6% growth in 2019). In terms of taxes / GDP ratio, the Central Bank forecasts a level of 22% for 2020 (against the previously expected 22.1%), with an annual decline of 0.3% percentage points. In 2021, this figure will increase by 0.3 percentage points.
In terms of the spending / GDP ratio, the Central Bank now predicts a level of 30.6% for 2020 (against the previously expected 29.4%), with an annual growth of 5.8 percentage points. 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 9 months amounted to only 31% of the planned volume, or 34.1 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 healthcare spending.
The Central Bank, taking into account these estimates, predicts that in 2020 the impact of fiscal policy on aggregate demand will be expanding (5.6%). This is due to the strengthening of signals of an extended nature - mainly (5 pp) from expenditures and lending to the economy, and small (0.6 pp) from income. According to the Central Bank, in 2021 the fiscal policy will be somewhat restrained, and in 2022-2023 it is planned to conduct a mostly neutral fiscal policy based on the baseline scenario of the medium-term spending program for 2021-2023. In parallel with the economic recovery, it is necessary, from the point of view of medium-term macroeconomic stability, to ensure, in line with the fiscal norms, a gradual decrease in the level of public debt from the currently forecasted 61.5% of GDP for 2020, by increasing tax revenues and improving the structure of expenditures. To note, 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% year on year (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- October, the deficit of the state budget of Armenia amounted to $ 424.6 million (of which 25% or $ 105.4 million fell in October), deteriorating the dynamics to a decline of 5.5-fold in y-o-y - from last year's surplus to the current deficit (with the continuing acceleration of the monthly growth of the negative level) ... Budget revenues in y-o-y terms decreased by 2% (against 19.2% growth a year earlier), amounting to $ 2.573 billion, while expenses sharply accelerated growth from 10.2% to 19.8%, amounting to $ 2.998 billion. MoM, a modest 25.5% increase in revenues was accompanied by a significant 42.4% increase in spending, as a result of which the deficit jumped 2.6-fold in October.
