Armenia`s finance minister on state of economy at end of first half of 2024

Economic activity in Armenia remains at a fairly high level. This was stated by the RA Minister of Finance Vahe Hovhannisyan on September 2 at a meeting of the parliamentary committee on financial and budgetary issues, presenting the execution of the state budget for January-June of this year. 

Thus, touching upon the main indicators, the head of the Ministry of  Finance indicated that the sharp increase in metallurgical production  and consumption of internally displaced persons from Artsakh, as well  as the economic activity of the latter, contributed to maintaining  the positions of the economic activity index (EAI). In particular,  according to the results of the first half of the year, the EAI was  10.4%, which is mainly due to the growth of industrial output, trade  and services. Construction and the agricultural sector also  contributed to the recorded growth, noted Hovhannisyan (the leaders  in growth were: trade turnover with an indicator of 22.9%,  construction with 18.2%, industry with 18.2%, services with 4.4%,  electricity production with 5%, agriculture with 4% - ed.).

During the reporting period, inbound tourism to Armenia decreased by  6.1% compared to last year, which is mainly due to a 23.6% decrease  in the number of tourists from the Russian Federation. Along with  this, an increase in the number of visitors from Georgia, Iran and  India was recorded. 

As a result, despite the decline in the current year compared to the  previous one, the current figures significantly exceed the 2019  figures, the Minister said. Transfers coming to Armenia have also  decreased, the head of the Ministry of Finance noted. Thus, the net  inflow of remittances decreased by 48.3%, mainly due to a 64.9%  decrease in the net inflow of transfers for non-commercial purposes  from the Russian Federation. 

The average monthly number of officially registered unemployed  decreased by 4.1%, amounting to 44.5 thousand people, the number of  hired workers increased by 5% - to 745,978. The average salary  increased by 6.8%, while in the public sector, compared to the  private sector, salaries grew faster. Nevertheless, in the public  sector, the average monthly salary is 211,319 drams, and for  <private> - 306,316 drams. Real wages in Armenia under 0.6%  conditions increased by 7.4%.

At the same time, as Hovhannisyan noted, 12-month natural inflation  continues to be in the negative range - at the level of 0.8%. At the  same time, the Central Bank in the first half of the year reduced the  refinancing rate by 1.25 percentage points - to 8%. As a result, the  yield on government bonds decreased. During the reporting period,  compared to January-June 2023, due to a significant decline in the  country risk premium, the yield on Eurobonds on the secondary market  also decreased. According to the head of the Ministry of Finance, in  general, it can be said that the tax and budget policy of the  country's authorities has had a certain positive impact.

Thus, during the reporting period, the revenues of the state treasury  of Armenia, compared to the same period last year, increased by 4.7%.  Thus, for January-June 2024, the revenues of the state budget of  Armenia amounted to 1 trillion 243.7 billion drams, ensuring 92% of  the fulfillment of the indicator projected by the revised program for  the first half of the year. Compared to the same period last year,  the revenues of the state budget for the reporting period increased  by 7.2% or 83 billion drams. At the same time, the performance of the  indicator compared to the annual <revised> amounted to 45.6%. The  growth of state treasury revenues, according to the minister, is  largely due to the increase in tax revenues in almost all areas, with  the exception of VAT and excise tax. At the same time, during the  reporting period, a shortfall of about 8% was recorded; it was  planned to collect taxes and duties for 1 trillion 305 billion drams,  but deductions amounted to only 1 trillion 187.6 billion, or 117.4  billion drams less than planned.

The RA state budget expenditures amounted to 1 trillion 232.7 billion  drams, ensuring 87.5% of the implementation of the revised program  for the first half of the year (1 trillion 408.5 billion drams).   Compared to the same period last year, the indicator increased by  20.1% or 206.3 billion drams. The performance of the indicator  compared to the annual <revised> was 38.4%. For January-June 2024,  the RA state budget was executed with a surplus of about 11 billion  drams. Meanwhile, for the reporting period, the deficit was planned  in the amount of 56.4 billion drams, and the surplus for the same  period last year was 134.3 billion drams. Let us recall that  according to the state budget for 2024, in this year under conditions  of ensuring 7% GDP growth, the revenues of the state treasury of  Armenia will amount to 2 trillion 723 billion drams (25.9% of GDP),  and expenditures - 3 trillion 206 billion drams (30.5% of GDP). Of  the 2 trillion 723 billion drams of state treasury revenues, 2  trillion 613 billion will be tax revenues and state duties (24.9% of  GDP). 22 billion 276 million drams will be official grants and 87  billion 676 million - other revenues. The GDP deflator will grow by  4%. Average inflation is projected at 3.2%. The state budget deficit  will amount to 482.9 billion drams or 4.6% of GDP.