Finance Minister Vahe Hovannisian said on Wednesday that the full-year shortfall will total about 200 billion drams ($506 million), a figure equivalent to nearly 8 percent of the tax revenue target set by the 2024 state budget.
Hovannisian said the government had to cut back on its current and capital expenditures and tap the budgetary Reserve Fund to make up for the shortfall. He downplayed it at the same time, saying that no capital projects have been fully cancelled as a result.
The worse-than-expected tax collection appears to reflect slowing GDP growth which is projected at 5.8 percent this year. 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. Also, Armenia appears to have become this year a conduit for exports of Russian diamonds and gold to world markets. Some local economists say the lucrative re-exports can no longer translate into strong increases in tax revenue because they mainly benefit a narrow circle of individuals.
The government has forecast a growth rate of 5.1 percent for 2025. Citing this downward trend, Hovannisian said last month that it should spend public money more sparingly while continuing to combat tax evasion.
A senior official from the International Monetary Fund similarly said later in November that economic growth in Armenia is moderating to “more sustainable levels” due to the dwindling impact of the “transitory factors.”