Economist Haykaz Fanyan has described Armenia’s draft state budget for 2025 as "overly ambitious," noting that this applies to both the revenue and expenditure sides.
According to Fanyan, the government plans to increase the ratio of expenditures to GDP from 30.4% in 2024 to 31.5% in 2025. "This means that budget expenditures will grow by approximately $1.04 billion compared to 2024," Fanyan said in an interview with BMG.
The economist also highlighted the government’s plans to increase tax revenues. Even with an economic growth forecast of 5.6% and a GDP deflator of 3.5%, generating an additional $781.5 million in tax revenue will require "tightening the tax belts."
"This implies stricter tax administration and changes in tax policy, which, according to Fanyan, are difficult to consider realistic," the economist believes.
"Now you might ask, what will we do if we fall short? It allows for maintaining fiscal balance, which is certainly good, but at the same time, it creates a bad precedent," Fanyan noted.
He emphasized that the budget is also a "promise" the government makes to residents, foreign private investors, and international financial institutions. "If this promise is constantly unmet, uncertainty grows," he explained.
Thus, Fanyan expressed concerns about the feasibility of the proposed budget and the potential consequences of failing to meet its targets for Armenia’s economic stability and trust in the government.
The Budget Projects an Increase in Revenues and Expenditures
Armenia’s 2025 state budget bill, recently approved by the government, envisions a significant increase in both revenues and expenditures.
According to the draft, state budget revenues in 2025 are expected to reach 2.873 trillion AMD (about $7.39 billion). This is 11% higher than the projected figure for 2024 and 22% above the actual revenue levels in 2023.
The expenditure side of the 2025 budget is set at 3.482 trillion AMD (approximately $8.95 billion). This is 13% higher than the expected figure for 2024 and 37% above the actual spending levels in 2023.
The state budget deficit for 2025 is projected to be around 609 billion AMD ($1.57 billion).
The Armenian government anticipates an increase in the ratio of expenditures to GDP. While this figure is expected to be 30.4% in 2024, it should rise to 31.5% in 2025. For comparison, the actual ratio in 2023 was 27%.
It is important to note that the increase in the expenditure-to-GDP ratio from 2024 is partially due to the inclusion of mortgage interest returns in the state budget expenditures, which were previously deducted from income tax.
Without these amounts, the state budget expenditures as a percentage of GDP would be 29.7% in 2024 and 30.8% in 2025.
