Armenian Government Cuts 2025 Growth Target

Armenia - Finance Minister Vahe Hovannisian addresses the Armenian parliament, December 3, 2024.

The Armenian government pushed its draft state budget for next year through the parliament on Wednesday after revising downwards its economic growth projection.

Finance Minister Vahe Hovannisian pointed to slowing growth of Armenia’s GDP when the National Assembly began debating the proposed budget on November 12. The domestic economy is projected to grow by 5.8 percent this year and 5.6 percent next year, he said.

Speaking in the parliament on Tuesday, Hovannisian forecast a growth rate of 5.1 percent for 2025. This is why, he said, the Armenian government has slightly cut its spending and revenue targets.

The final version of the budget approved by the parliament calls for a more than 7 percent rise in public spending projected at 3.44 trillion drams ($8.6 billion). By comparison, government expenditures were due to soar by 23 percent this year.

National defense is the only area that will receive considerably more public funds in 2025. Armenia’s military spending is to rise by 20 percent to almost 665 billion drams (about $1.7 billion).

Hovannisian said that due to the slower growth the government should spend public money more sparingly while keeping up its crackdown on tax evasion.

In its five-year policy program approved by the parliament in 2021, the government pledged to ensure that the Armenian economy expands by 7 percent annually. Prime Minister Nikol Pashinian insisted in December 2023 that it is on track to continue meeting this growth target.

GDP growth reached 12 percent in 2022 and 8.7 percent in 2023 mainly because of positive side-effects of Western sanctions against Russia. Armenian entrepreneurs took advantage of the sanctions by re-exporting many Western-manufactured goods to Russia. Early this year, Armenia appeared to have also become a conduit for exports of Russian diamonds and gold to world markets.

“The impact of these transitory factors is going down,” Umang Rawat, the International Monetary Fund’s resident representative in Armenia, said last week. “Growth is going to move towards more sustainable, normal levels.”