ArmInfo. Armenia's nominal GDP in 2025 is projected to reach AMD 11 trillion 50 billion (about $28.5 billion), compared to the expected AMD 10 trillion 110 billion by the end of this year. The real GDP growth is forecasted to be 5.6%, falling short of the minimum 7% set by the Cabinet's program of activities for 2021-2026. This is stated in the draft state budget for next year, which was approved by the government on September 26th.
As noted by the Ministry of Finance, economic growth from 2021 to 2023 was mainly driven by the growth of services, contributing an average of 6.7 percentage points Construction and industry also played a role in economic growth (their contribution averaged 0.8 and 0.5 percentage points, respectively), while agriculture had a slightly negative impact on economic growth. On the demand side, growth was supported by both domestic factors (mainly consumption and private investment) and export growth. In 2024, the pace of economic growth continued, driven by a sharp increase in the production of jewelry and raw metals, as well as the consumption and economic activity of our compatriots forcibly displaced from Nagorno-Karabakh to the Republic of Armenia. As a result, economic growth was recorded at 6.5% in the first half of the year.
All sectors of the economy experienced growth, with the main driver being services sector (contribution: 4.7 percentage points). The 6.7% increase in services was primarily attributed to the growth in trade (22.1%), financial and insurance (15.3%) and real estate (12.8%) sub-sectors. As a result of the current economic development, the continued increase in the role of public capital expenditure, as well as the possible impact of the underground operation of the Sotk mine and structural reforms, economic growth is expected to be around 5.8% in 2024, 5.6% in 2025, and an average growth of 5.5% in 2026-2027.
In 2024 and in the medium term, economic growth will be driven mainly by the services sector. Additionally, growth in industry and construction will support economic expansion. Agriculture will also have a positive impact on economic growth. Overall demand is expected to increase mainly due to an increase in domestic consumer and investment demand. In 2024 and 2025, as well as in 2026-2027, the GDP deflator will increase due to the dynamics of the consumer price index and international commodity prices. The deflator in 2025 is projected to reach 3.5%, compared to the expected 1.1% by the end of this year. The average inflation will be 3.6%, significantly higher than the 0.4% seen in the current year. Given these conditions, the nominal GDP in 2024 will amount to AMD 10 billion 110.2 billion, which is AMD 125.2 billion less than projected by the Medium-Term Expenditure Program for 2025-2027, and AMD 405.9 billion less than the budget figure for 2024.
In 2025, the nominal GDP is projected to be AMD 11050.1 billion, which is AMD 147.1 billion less than the PSSR's projection for 2025-2027. The draft budget predicts that in the medium term, the nominal GDP will grow by an average of 9.6%, reaching AMD 13.303 billion in 2027. State treasury expenditures for 2025 are planned at the level of AMD 3 trillion 482.4 billion ($7.8 billion), of which AMD 2 trillion 749.2 billion will be current expenditures, and AMD 733.2 billion ($1.88 billion) will be capital expenditures (6.6% of GDP), which is higher than the planned figure for 2024, AMD 695 billion ($1.79 billion), and the actual one of 639 billion ($1.65 billion). The ratio of taxes to GDP, is planned to increase by 0.7% compared to the expected figure for 2024, which is 0.1% higher than the approved budget, bringing it to the target indicator of 25%. The deficit is expected to be AMD 609.4 billion, against AMD 482.9 billion or 4.6% of GDP in the budget approved for this year. The government debt/GDP ratio in 2025 is projected to be 53.5%.
