The Luys Analytical Center has presented a detailed analysis of Armenia's 2025 state budget, highlighting increased funding for security agencies at the expense of reduced spending on economic development. Experts caution that this shift may negatively impact future economic growth.
According to the analysis, expenditures on the police and National Security Service will rise by $51.7 million in 2025, while funding for the economic sector will decrease by $90.5 million (or 13.5%).
The experts point out several positive aspects of the 2025 budget, including a three-year macroeconomic forecast and more realistic economic growth projections. However, they express concern over the planned significant improvement in the tax-to-GDP ratio by 0.7 percentage points, which is considerably higher than the historical average of 0.3 percentage points.
Economic growth is expected to slow, from 5.8% in 2024 to 5.1% in 2025. Current growth, according to the analysis, is largely driven by temporary factors such as re-exports and a construction boom.
The budget deficit in 2025 is projected to reach 5.5% of GDP, leading to an increase in public debt from 49.8% of GDP at the end of 2024 to 54.3% in 2025 and 55.6% by 2027. A particular concern is that the deficit growth is primarily due to increased current expenditures, including interest payments on debt.
Total budget revenues are planned to grow by 9.4%, while expenditures will rise by 11.9%, with capital expenditures increasing by 14.9%, primarily driven by defense spending. Additionally, the budget allocates an extra $14.3 million for environmental services, which, according to experts, is not directly related to economic development.
