Armenian government promises 5.4% GDP growth, but the lack of clear  mechanisms calls into question achievability of this goal -  ex-official

ArmInfo.The draft state budget for 2026 presented by the Armenian government, in its content, is an attempt to combine the idea of "balancing opportunities and  risks." However, the document often overflows with formal ambitions  without sufficient justification for how they will be translated into  real economic results. Economist and former head of the State Revenue  Committee of the Republic of Armenia David Ananyan shared this  assessment on social media.

It is worth noting that, according to the document, Armenia's GDP  growth in 2026 is projected at 5.4%, with a deflator of 3%. According  to the draft, state treasury revenues are expected to reach 3  trillion 091 billion drams, of which 2 trillion 972 billion 850  million drams will be tax revenues and state duties, 20.5 billion  drams will be official grants, and 97.7 billion drams will be other  revenues. Community revenues in Armenia in 2026 are estimated at  347.3 billion drams (including official grants received from the  state treasury).

The deficit will reach 537.5 billion drams, or 4.5% of GDP (compared  to 609 billion drams, or 5.5%, in 2025). 271.3 billion drams will be  allocated from external sources to cover the deficit, and 266.2  billion drams from domestic sources. As a result, the government  debt/GDP ratio will increase from 50.7% to 53.5% by the end of 2026,  and in absolute terms, by 810.9 billion drams, to 6 trillion 384.7  billion drams.

According to Ananyan, in terms of fiscal policy, the government is  working within the framework of the "consolidation" agenda with the  goal of reducing the deficit and bringing the debt to approximately  50% of GDP by 2030. This is a necessary step, but, according to the  expert, the document is worryingly devoid of countercyclical  components. In the event of potential shocks in external markets,  Armenia will be virtually unable to respond flexibly.

The economist welcomes the policy of increasing the tax-to-GDP ratio  to 25-26%.  However, he points out, tax policy is still viewed  primarily as administrative. No mechanisms for deep reforms of the  investment environment or changes in the economic structure are  proposed. "The fight against the shadow economy remains a political  slogan, not a concrete set of tools," he believes.

Ananyan also notes the justification for the policy of increasing the  share of capital expenditures (5-6% of GDP). But, again, he notes,  priority is given to volume over quality. The real impact of road  construction or infrastructure projects on economic turnover and the  restoration of the industrial base is not assessed. "There's a risk  that we'll end up with large budget figures but inadequate economic  results," the expert writes.

Regarding socioeconomic priorities-the introduction of health  insurance and the implementation of educational and social  programs-Ananyan notes the prevalence of the "expenditure" approach.  Social assistance is practically unrelated to programs promoting  employment and increasing labor productivity. Under these  circumstances, even large expenditures could become a temporary  relief rather than a long-term solution, he continues.

"Defense expenditures are presented in the budget sparingly and  without strategic justification. Meanwhile, for Armenia, they are a  necessary condition for existence. A serious problem is the lack of  transparency, inefficient procurement, and lack of connection to  economic policy," the former head of the State Revenue Committee  writes.

In this regard, David Ananyan believes that the presented budget  contains a number of positive goals, but they are dominated by a more  'accounting' approach. If the government does not change its emphasis  and focus on structural changes and qualitative results, the budget  will become another 'expenditure document' rather than a strategic  guide to development, he notes.

In addition to criticism, the economist also makes recommendations.  In particular, he believes it is necessary to:

1. Clarify sectoral drivers. The budget should reflect which sectors  will be the main sources of economic growth (IT, industry,  agriculture) and what instruments will be used to stimulate them.

2. Add a countercyclical component. Automatic mechanisms must be  developed that will be activated in the event of economic shocks,  increasing the flexibility of fiscal policy.

3. Define results-oriented criteria. Capital and social programs  should have clear key performance indicators (number of jobs, export  growth, labor productivity growth), rather than simply report on  expenses.

4. Link social and economic policy. Support for internally displaced  and vulnerable compatriots (from Artsakh) must be combined with  employment and income-boosting programs. Otherwise, the state will  simply remain dependent on social payments.

5. Focus on quality. Roads, schools, and reservoirs should be viewed  not as quantitative indicators, but as real tools for economic  activity and development.

6. Effectively stimulate innovation. Akademgorodok and state support  for high technology must be transformed into a  "knowledge-production-business" chain. Without this connection,  investments will not translate into competitive products.

7. Clarify defense sector programs. Weapons modernization, air  defense, drones, cybersecurity. Increase procurement transparency and  efficiency. Develop the local defense industry, link it with the IT  sector, and focus on long-term defense infrastructure. 

"These are just ideological generalizations for now; analysis of the  digital and information sectors is still to come," writes former head  of the State Revenue Committee of Armenia, David Ananyan.