The new budget would substantially increase tax revenues and expenditures, but the government’s macroeconomic projections have been received skeptically.
Armenia’s government has proposed a budget with significantly higher revenues and expenses than in previous years.
The 2020 draft budget projects revenues of 1.7 trillion drams (about $3.6 billion) and expenditures of 1.9 trillion drams ($4 billion). That represents a 13 percent growth in revenues and 14 percent in expenditures from the 2019 budget. The increases over 2018’s budget are 27 percent and 29 percent, respectively.
Prime Minister Nikol Pashinyan said the substantially higher budget was a fulfillment of one of the key promises that he made in his protest campaign last year that propelled him to power.
“This is a revolutionary budget,” he said during a November 15 debate on the budget in parliament. “During the 2018 revolution when I was not yet prime minister, I publicly announced that the budget of Armenia should increase by 30-35 percent within one-to-two years. This was one of the promises of the revolution.” (He further explained that adjustments to the 2018 budget mean that the current draft in fact represents a full 35 percent increase in revenues.)
The revenue increase is largely based on increased tax receipts, in anticipation of a GDP growth rate of 4.9 percent, but officials have suggested that is a conservative projection. Artak Manukyan, a member of parliament from Pashinyan’s My Step bloc, said that “in 2019 we predicted 4.9 percent growth and got 6 percent.” The government has suggested that growth could in fact reach 7-to-9 percent next year.
But independent economists suggest that 4.9 percent may be about right: Hrant Mikaelian, of the Yerevan think tank Caucasus Institute, wrote in a recent blog post that several factors that drove growth this year – including an increase in gambling-related revenues, mining income, and duties on cars – may have run out of steam and won’t continue to drive the economy in 2020. “So in reality, even 5 percent wouldn’t be a bad result,” Mikaelian wrote.
Increases in expenditures are expected across the board.