ArmInfo.The growth of economic activity in Armenia has slowed sharply. Experts from the Luys Foundation came to this conclusion after analyzing the socio-economic development of the RA economy in January-May 2024.
In particular, as noted, in May of this year. the economic activity index (EAI) was 5.2%, down 4.8 percentage points compared to the previous month. As a result, the IEA for January-May also slowed down, amounting to 11.2%. The slowdown in the growth rate of the indicator is mainly due to a sharp reduction or cessation of jewelry activities. The latter, in turn, experts believe, was an expected phenomenon, since, as mentioned in previous reports of the Fund, this type of activity, which ensures high rates of economic growth, is quite unstable in nature and can suddenly stop as a result of changes in external factors, which happened this May.
As a result of the sharp decline in activity in the jewelry sector, the growth rate of exports and imports slowed down. However, the sharp decline in import growth rates suggests that jewelry products are no longer being imported, and it is expected that this activity is unlikely to continue in the coming months.
The growth rate of tax revenues has also fallen sharply. In the context of a sharp slowdown in economic activity, the growth rate of tax revenues also decreased, reaching almost zero growth in May - 0.8% (and taking into account income tax refunds - 0.2%). As a result, the growth in tax revenues in January-May amounted to 7.9%, and taking into account the refund of income tax on interest payments on mortgage loans - 5.1%. The latter is significantly lower than the IEA, which is due to the fact that the activities that determine the main economic growth are not taxed to the required extent, but the government does not take steps in this direction. At the same time, the slowdown in the IEA in May further reduced the growth rate of tax revenues, the continuation of which could cause problems in terms of budget execution.
Against this background, the growth rate of consumer loans continues to accelerate. Consumer loan growth was quite strong in 2024 and has continued to accelerate in recent months, reaching 24.9% in May. Given the slowdown and significant decline in economic activity and wage growth, high credit growth is problematic and could pose risks to sustainability in the medium term.
At the end of May in parliament, the head of the State Revenue Committee, Rustam Badasyan, following the head of the Ministry of Finance, Vahe Hovhannisyan, admitted the existence of problems associated with ensuring the tax collection indicators recorded in the state budget. The head of the State Revenue Committee did not specify the amount of the "shortfall", but indicated that the problems were caused by changes in the structure of the economy, which contributed to the sharp growth of areas "without tax potential". The chief financier of the republic, in turn, said that there is a risk of not collecting 60 billion drams from the amount fixed in the approved state budget for this year. At the same time, according to him, the deviation from the plan will not exceed 3-4%, which will be within normal limits. "If there is a need to reduce expenses due to a lack of tax collection, then we can do that," concluded the chief financier of Armenia.
Meanwhile, according to the Ministry of Finance, in the first 4 months of this year. VAT and excise tax collections decreased by 3.54% and 9.04%, respectively, providing 30.5% of budget revenues. For the same period in 2023, they provided 35% of revenue. For the reporting period of this year. About 828.8 billion drams of taxes/duties were credited to the RA state budget, or 63.5% of the program indicator for the first half of the year (1 trillion 304.9 billion according to the revised plan).
