"Fact" daily writes:
The 2024 budget was based on the goal of ensuring 7 percent economic growth, but now the government predicts that we will conclude the year with 5.8 percent economic growth.
The conditions for such a forecast are created by the fact that the rate of economic growth decreases sharply starting from the second half of the year. In particular, the growth rate of economic activity in October reached the lowest index of this year - 4.2%, which is about 2.8 percentage points lower than the index of September.
It is expected that by the end of the year, the downward trend in growth will deepen. Naturally, this situation will lead to budget underperformance.
"Luys" Foundation, analyzing the socio-economic developments of the RA economy in 2024. In January-October, he presented data that the deficit of the state budget is growing at a high speed. The total revenues of the state budget in 2024 in January-October they made 2,073.4 billion drams, increasing by 6.5%, which decreased by 0.1 percentage point compared to January-September.
Non-tax revenues decreased by 5.7%. Basically, in the last months of the year, the volume of revenue receipts will further decrease.
And despite the fact that budget revenues not only do not increase, but also register a decreasing trend, the expenditure part of the budget is continuously increasing. Total expenses in 2024 in January-October amounted to 2,284.9 billion drams, increasing by 16.3%. As a result, in January-October 2024, the expenses of the state budget significantly exceeded the revenues, as a result of which a deficit of around 211.5 billion drams was formed, while in the same period of the previous year during the period, the deficit was only 19 billion drams.
And the authorities mainly cover the budget deficit by borrowing money.
This is the reason why the volume of state debt has increased sharply in recent months, reaching 12.6 billion dollars. Only in October of this year compared to the same month last year, the debt increased by 13.6%.
But increasing the state debt does not in any way contribute to the improvement of economic conditions and the promotion of economic growth. The gaps in the budget are barely closed with borrowed resources.
Another option for generating revenues for the budget is a sharp increase in taxes.
In the name of transitioning to a general taxation system and creating equal tax conditions, the government excludes small businesses from the turnover tax field, increasing the tax burden several times.
By doing so, they create conditions so that, on the one hand, businessmen cannot grow, and on the other hand, the field of small and medium-sized businesses will be widely deserted, and large businesses and monopolists will find themselves in commanding positions, as a result of which the competition in the economy will weaken. The existing picture will in turn lead to new price increases and job cuts.
Such a negative background will have its effect on the picture of economic growth next year. Without it, there are significant risks related to the execution of the next year's budget.
In particular, it will be difficult to ensure the goal of 5.6 percent economic growth planned by the 2025 budget.
And the fact that, in general, the economic growth of Armenia has been largely dependent on external factors, particularly on re-exports, is of particular importance.
It is no coincidence that during the past year, the main driving force of economic growth has become the re-export of jewelry products, because as a result of the sanctions imposed by the West on Russia, Russian jewelry raw materials also go to foreign markets through Armenia.
And if the international situation due to the Russian-Ukrainian conflict or other factors suddenly changes, and the re-export channels are closed, it will greatly affect the economic growth of Armenia, as well as the provision of the income sector of the budget.
In other words, the internal potential of Armenia's economy has not been developed in order to reduce the dependence on re-exports.
As a result, there is a high probability that next year's budget deficit may be larger than planned, and it is impossible to close the budget gap every time by taking on new debts, because the state will not be able to cover these debts.
ARSEN SAHAKYAN
