Capital expenditure increase and social direction

T he state budget for 2020 is expected to be 30% more compared to that of 2018, a goal set by the new government from May of last year. The proposed revenue for the 2020 state budget is about 13.4% more compared to the planned budget of 2019 and 26.5% more compared to the actual budget of 2018. Spending will be 14% higher than the originally planned budget of 2019 and almost 30% more compared to the actual budget of 2018. The revenues of the state treasury in 2020 will be about 1 tri. 697 bil. AMD and expenses will be 1 tril. 880 bil. AMD. The budget deficit will be about 183 bil. AMD, about 2.6% of the nominal GDP planned for the 2020.

The 2020 draft of the state budget envisages that 94.4% of revenues, which amounts to 1 tril. 602 bil. AMD, will be collected from state taxes. Grants allocated will amount to 2% of the revenue, and other funds will form 3.6%. The forecast for revenue growth compared to the previous year is mainly based on the 2020 forecast for a 9.5% increase in tax revenues.

According to the Ministry of Finance, GDP growth in Armenia will reach 5.4% in 2019 and 4.9% in 2020. When observing the shift in budget trends, revenues and overall GDP we will also notice shifts in growth. 

It has been envisaged for the 2020 budget that revenues will form 24.2% of the GDP. With the deficit under control at about 2.2% of GDP, the RA Government has a planned expenditure for the 2020 budget by 26.5% of the GDP or 1 tril. 880 bil. AMD.

Increase in expenses

B udget expenses have also increased, envisaged by the draft of the state budget for 2020, 14% more spending is estimated compared to the 2019 drafted budget and about 30% more compared to the actual budget expenditure of 2018.

According to the drafted state budget for 2020, the largest expenditure is 489.4 bil. AMD allocated to workers rights and social security. Generally, expenses allocated to social security amounted to an increase by 17.5% compared to the actual expenses of 2018 budget and by 10.2% compared to the drafted expenses for 2019.

The next largest expense of about 347.2 bil. AMD has been allocated to public services and 241.7 bil. AMD is allocated to the economic relations.

It is noteworthy, that expenses envisaged for defense in 2020 exceed 31% of the expenditure for 2018 and are 0.9% less compared to the 2019 draft segment.

The expenses allocated to improving economic relations exceeds 115% of the same indicator of 2018 and 81% of the 2019 indicator. In the field of economics, 2020 expenses allocated to agriculture, forest and fishing will be increased about 3 times, irrigation expenses about 3.5 times, the expenses for road transport will be doubled and the expenses allocated to tourism will be reduced by 23% compared to 2018.

The draft budget for 2020 envisages an expenditure of about 26 bil. AMD for construction and utilities, which exceeds twice the actual indicator of the 2018 and 1.4 times the 2019 indicator. The increase in expenditure is attributed to the water supply rates, upkeep and general expenses.

The budget for 2020 envisages 21% increase of expenditure in the field of health, 15% increase in the field of education and 2.4% decrease in leisure, religion and culture expenses compared to the draft budget for 2019.

When comparing the state budgets from the previous years, the budget for 2020 is considered more predictable when you take into consideration the stricter tax collection system. The state budget’s segment for expenditure, particularly the increase allocated for economic relations compared to the previous budget indicates positive developments in the economy for the upcoming years. Expenses allocated to social security has also increased this year, which will improve the living conditions and quality of life. Hence, the drafted budget for 2020 may become the basis for coming years to directly work towards the objective of the ongoing reforms promised by the new government.