The State Revenue Committee (SRC) collected nearly 1,19 trillion drams ($3.1 billion) in various taxes and duties in that period, 117.4 billion drams ($300 million) less than was projected by Armenia’s 2024 state budget.
Neither the SRC nor the Finance Ministry has commented on the reasons for the serious shortfall so far. It is not clear whether the tax authorities will try to make up for it in the second half of the year, widen the budget deficit or cut government spending.
The deficit was already expected to rise to 4.6 percent of GDP in 2024 due to a 23 percent surge public spending planned by the government. Its budget calls for 3.2 trillion drams in various expenditures and a total tax revenue of just over 2.6 trillion drams.
The worse-than-expected tax collection contrasts with a further strong increase in Armenia’s GDP. According to government data, economic growth in the country accelerated to 9.2 percent in the first quarter and remained strong in April and May.
The Armenian economy grew by 12 percent in 2022 and 8 percent in 2023 mainly because of positive side-effects of Western sanctions against Russia. Armenian entrepreneurs have taken advantage of the sanctions by re-exporting many Western-manufactured goods to Russia. In recent months, Armenia appears to have also become a conduit for exports of Russian diamonds and gold to world markets.
According to Armen Ktoyan, a senior professor at the Armenian State University of Economics, this growth driven by the lucrative re-exports can no longer translate into corresponding increases in tax revenue because it mainly benefits a narrow circle of individuals.
“We are seeing structural changes in our economy that do not increase its viability,” Ktoyan told RFE/RL’s Armenian Service. “The opposite should have been the case.”
“In essence, we are becoming, in large measure, a re-exporting, service-based economy,” added the economist.