Armenia plans to reduce its budget deficit to 1% by 2030: Finance  Minister

ArmInfo. Armenia's Medium-Term Expenditure Program 2026-2028 is a strong and ambitious  document, as stated by the Minister of Finance of the Republic of Armenia, Vahe  Hovhannisyan, during a press conference on June 16  where the  document was presented.

According to the document, if current economic developments are maintained, the Sotk mine operates smoothly, the Amulsar deposit is restarted, and structural reforms are implemented, Armenia's economic growth is projected to be about 5.1% in 2025. The  medium term average growth is expected to be at 5.3%.  Specifically, GDP growth is forecasted to be 5.1% in 2026, 5.3% in 2027, 5.2% in 2028, and 5.5% in both 2029 and 2030. The deflator will be 2.5% in 2025 and 3% in the years  up to and including 2030.  Nominal GDP is expected to  reach 10,976.1 billion drams in 2025, which is 84 billion drams  higher than the figure planned in the state budget for that year.  Over the medium term, nominal GDP is forecasted to grow by an average of 8.5%, amounting to 16,488.6 billion drams by 2030 (11 trillion 887 billion drams in 2026, 12 trillion 893 billion drams in 2027 and 13 trillion 976 billion drams by the end of 2028).

Given a slowdown in economic activity and a decrease in the role of re-exports in 2025, a significant reduction in both exports and imports is expected (a decline of 36.6% and 33.5%, respectively). This is expected to lead to the deterioration of the negative trade balance and a positive balance of services in 2025, resulting in a continued increase of the current account deficit to 5% of GDP. In the medium term, with the leveling of positive factors formed in 2022-2024, the current account deficit will stabilize around the long-term equilibrium level, provided that the impact of the positive factors that have arisen is neutralized. The financing of the budget deficit through net borrowed funds in 2025 is estimated to be at the level of 635.7 billion drams (compared to 399.9 billion drams in 2024), 591.5 billion drams in 2026, 517.5 billion drams in 2027, and 534.5 billion drams in 2028.

In 2026-2028, government debt is projected to reach 54-55%, after which, as a result of a constant reduction in the budget deficit, it will approach 50% by 2030 (48% of GDP by the end of 2024, 52.6% by the end of 2025, 54.6%% by the end of 2026,  54.%  by the end of 2027 and 55.4% by the end of 2028.  According to the program, the share of debt raised in national currency in the government debt structure by the end of 2025 will be 48% (compared to 50.8% by the end of 2024),  remaining the same in 2026, and decreasing to 48.1 and 47.3% in 2027 and 2028, respectively. Domestic debt, which was at  51.8% by the end of 2024, will decrease to 50% this year, and then to 49.7%, 49.3% and 48.1% from 2026 to 2028.  Payments on Armenian government debt will increase in the medium term, reaching reach 1.202 billion drams in 2028 (from 1.108 billion in 2025).

The average inflation rate in 2025 is expected to be 2.5%, then  gradually reach the target of 3% and stabilize around it in the  medium term. The Central Bank will constantly monitor economic development scenarios and take adequate measures to ensure 3% inflation and price stability in the medium term.  In the medium term, due to improvements in tax administration, efforts to combat the shadow economy, and tax policy measures, there is an  expectation of a continuous improvement in the tax/GDP ratio: 0.7 in 2025, 0.5 in 2026 and 0.2 percentage points in subsequent years. This will brings  the final tax/GDP ratio closer to the effective limit of  possibilities, around 25-26% of GDP, considering the  current  legislation and economic structure. For the medium term spanning from 2026-2028, the goal is to ensure fiscal sustainability by reducing the budget deficit. The plan is to gradually decrease the deficit to 2.8% of GDP from 5.5%  in 2025 (4.5% in 2026, 3.5% in 2027, 2.8% in 2028, 1.8% in 2029 and 1% in 2030). This will require an annual reduction of the share of budget expenditure in GDP by approximately  1 percentage point. Current expenditure in GDP will decrease in line with fiscal consolidation goals, and capital expenditures will  stabilize at a level significantly higher than historical levels,  contributing to the overall strengthening of the economy and security of infrastructure.

  Hovhannisyan said.  The share of capital expenditures in GDP will projected to stabilize at an average of 5.9% until 2028, while current expenditures are expected to gradually decrease from 24.3% in 2026 to 22.7% of GDP in 2028.