In 2024, thanks to the natural favorable factors that appeared on the RA economy as a result of the Russian-Ukrainian conflict. 10.4% indicator of economic activity was registered in the first half of the year. At first glance, it may seem that the situation in RA in terms of economic growth is quite favorable, but in the case of a little in-depth study, a number of serious problems, both actually present in the economy and possible in the near future, are revealed. In particular, the statistical data prove that the influence of the aforementioned favorable factors is gradually weakening. It is no coincidence that since April there has been a sharp slowdown in the growth of the manufacturing industry (the “locomotive” of high economic activity in the first half of the year, in terms of the volume of jewelry activity), as a result of which in 2024 in the second quarter, the cumulative growth of the manufacturing industry was recorded every month, significantly lower than the previous month’s indicator. Moreover, along with this growth, a number of sub-sectors of key importance for the RA economy (for example, production of food, clothing, chemicals and chemical products, etc.) have been declining for months relatively high) was able to “neutralize” the impact of that decline, “masking” the deterioration of the industrial structure The “deformation” that began at the beginning of the Russian-Ukrainian conflict, under the influence of exogenous factors, has gained new momentum in recent months due to the developments in the sub-branch of jewelry activity, however, it is already clear that the economy will face serious problems if the aforementioned exogenous factors continue to be neutralized.
2024 in the first half of the year, the rate of growth of budget revenues is more than three times less than the indicator of the same period of the previous year, due to a more than four-fold slowdown in the growth of tax revenues and state duties. The total revenues of the RA state budget for the first half of 2024 amounted to 1,243.7 billion drams and fell short of the specified plan by 8.0%.
Tax revenues of the state budget and state duties during the reporting period amounted to 1,187.6 billion drams and were also underachieved by 9.0% compared to the specified plan.
The total expenses of the RA state budget in 2024. in the first half of the year amounted to 1,232.7 billion drams, or 12.5% less than the specified plan. Underperformance was recorded within the programs implemented by all the responsible bodies mentioned in the report. In terms of percentage, the most significant are the shortcomings of the programs under the responsibility of the Ministry of High-tech Industry, the Statistical Committee, the Foreign Intelligence Service and the Ministry of Economy.
2024 In the first half of the year, the RA state budget had a surplus of 11.0 billion drams, while it was planned to have a deficit of 56.4 billion drams.
It is noteworthy that very often the deviation between the actual and planned quantities of the budget, both in terms of revenues, expenses and deficit, is greater in relation to the specified plan than in relation to the approved plan. In other words, in many cases, instead of the planned indicators becoming more realistic as a result of the adjustment, a significant part of them “moved away” from reality. And this proves that the government still does not manage to solve the problem of insufficient level of budget planning skills. Instead, the report cites various “objective” justifications for all program implementation deficiencies: understaffing, bad weather conditions, problems related to the procurement process, procedural problems with donors, etc.
It becomes clear from the study of expenses by program classification of the budget that the current government has either not implemented a number of programs of vital importance for RA, or their performance is very low. Among such programs are, for example, “Development of the Military Industry Complex”, which was not implemented at all, and “Implementation of the Digital Transformation Process”, which was implemented by only 0.6%.
The fact that in 2024 in the first half of the year, both revenues and expenditures of the state budget were underachieved. The underachievement of budget expenditures is also caused by the underachievement of revenues. If the trends of the first half of the year are maintained, 2024 will be threatened on an annual basis. implementation of the state budget, and it is not excluded that it will lead to budget sequestration. Moreover, the growth rate of tax revenues, which is twice lower than the cumulative indicator of economic activity, perhaps indicates the most serious problems in the RA economy. Meanwhile, in addition to the fact that the tax administration is “limping”, the problem of ensuring the ability to effectively implement programs of key importance for the economy in the state administration system remains unsolved in the relevant bodies.
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“LUYS” Foundation
How might the slowdown in key sectors like jewelry manufacturing impact the overall stability of the Armenian economy?
Interview between Time.news Editor and Economic Expert on the Current State of the RA Economy
Editor: Good day, and welcome to Time.news! Today, we have a special guest, an economic expert who has closely analyzed the recent developments in the RA economy, particularly in light of the ongoing Russian-Ukrainian conflict. Thank you for joining us!
Expert: Thank you for having me. It’s a pleasure to discuss such a vital topic.
Editor: Let’s dive right in. Recent statistics show a 10.4% increase in economic activity in Armenia during the first half of 2024. At first glance, this seems positive. What do you attribute this growth to?
Expert: The growth can largely be attributed to several natural favorable factors that have emerged as a result of the Russian-Ukrainian conflict. This has opened markets and increased demand for certain sectors, particularly throughout the jewelry and metals industries. However, while the initial indicators appear encouraging, it’s crucial to look deeper into the structural issues that are beginning to surface.
Editor: That’s interesting. You mentioned that the manufacturing sector, which was a driving force behind this growth, has shown signs of a slowdown, especially in the jewelry industry. Can you elaborate on this?
Expert: Absolutely. Since April 2024, we have seen a notable deceleration in the manufacturing sector’s growth, which is concerning. The jewelry industry, which was initially robust, is facing declines that have begun to impact the overall economic activity. This slowdown has revealed weaknesses in other key sectors, such as food and clothing production, suggesting that the economic growth we observed might not be sustainable.
Editor: You also pointed out that the revenue growth for the state’s budget is significantly lower than last year. What does that imply for the overall economic health of the RA?
Expert: The situation is indeed alarming. The first half of 2024 saw budget revenue growth that was more than three times less than the previous year. This was primarily due to a large slowdown in tax revenues and state duties, which have fallen short of the planned targets. Essentially, this shortfall indicates that the economy might be slowing down, affecting the government’s ability to fund public programs and infrastructure, crucial for long-term growth.
Editor: Speaking of budgeting, could you touch on the discrepancies between actual and planned budget figures? What does this reveal about government practices?
Expert: Certainly. The discrepancies are quite telling. The deviation between actual revenues and expenses versus the planned quantities indicates that the government struggles with effective budget planning and management. Instead of refining plans to be more achievable, we see a trend where planned indicators move further from reality. This misalignment can lead to unaddressed economic challenges, as insufficient funding becomes a significant barrier to growth.
Editor: It seems like there are both immediate challenges and possible long-term ramifications if current trends continue. How do you foresee the economy evolving if these issues remain unaddressed?
Expert: If these problems persist, we may face a critical economic situation where the growth we initially experienced turns into stagnation. The economy could enter a period of contraction if key sectors continue to decline, and without proper adjustments in budgeting and policy planning, we risk facing higher unemployment rates and social unrest as well.
Editor: As we wrap up, what recommendations would you have for policymakers to navigate these challenges effectively?
Expert: Policymakers need to focus on realistic planning and prioritizing sectors that could provide sustainable growth. Encouraging investment in diverse industries, enhancing skills and workforce capabilities, and addressing the identified weaknesses in budget management will be pivotal. Additionally, fostering regional cooperation could help mitigate external shocks and stabilize the economy.
Editor: Thank you so much for your insights today. It’s essential for our audience to understand the intricacies of the economic landscape, especially during these tumultuous times.
Expert: Thank you for having me. I hope this discussion brings more awareness to the important economic issues at hand.
Editor: And thank you to our viewers for tuning in. Stay engaged, and keep an eye on our future discussions as we continue to explore evolving global economic topics.