ARMENIA’S 2008 BUDGET DEFICIT REMAINS BELOW PLAN
by Venla Sipila

World Markets Research Centre
Global Insight
February 11, 2009

According to figures from the Armenian Ministry of Finance, the state
budget of the country (excluding financing through external assistance
programmes) registered a deficit of 1.4 billion dram ($4US.6 million)
for the whole of last year, ARKA News reports. This result comes below
the targeted annual deficit of 25.3 billion dram. Including external
financing, the budget posted a surplus of 24.4 billion dram, which
compares to the planned amount of 24.9 billion dram and to the 2007
result of 15.4 billion dram. Budget revenues reached 759.2 billion
dram for the year, rising by 16% from 2007 and overshooting the
annual target by 0.4%. Specifically, tax incomes increased by 18.8%
over the year, their total of 598.8 billion dram over-performing the
originally budgeted amount by 0.3%. Revenue from the value-added tax
(VAT) accounted for over 53% of the total tax intake. At the same
time, expenditures amounted to 760.6 billion dram, gaining 21.2%
from the previous year and remaining 0.6% short of the budgeted total.

Significance:The nearly balanced budget was achieved although, at 6.8%,
annual GDP growth last year came in clearly below the expansion rate
of 10% projected in the fiscal plan. This year’s budget projects a
deficit of 40 billion dram, or 1.0% of GDP (seeArmenia: 1 December
2008:). As opposed to last year’s fiscal results, this year is not
likely to see the targets overshot as the GDP growth projection used
as a basis for the budget seems overly ambitious. In light of slowing
growth and the connected increased pressure on the fiscal balance,
as well as the budget’s continued reliance on foreign assistance,
additional progress in improving tax administration remains as vital
as ever.