Materializing opportunities needs favorable economic policy - Armenian economist

Gohar Gyulumyan Senior Economist in the World Bank’s Europe and Central Asia regional division of the Poverty Reduction and Economic Management (PREM) network, believes Armenia’s 2015 state budget is realistic and is socially-oriented.

Addressing Armenia’s accession to the Eurasian Economic Union (EEU) in an interview with Tert.am, she said that Armenia is most integrated with Russia and should benefit from EEU membership.

“EEU membership affords opportunities, but the opportunities will not materialize unless relevant economic policies are developed, infrastructures and services created,” Ms Gyulumyan said.

The WB-forecast economic growth is lower than the budgeted growth according to Armenia’s government.

“Considering macroeconomic forecasts, I would say the difference will be within 1%. In any case, forecasts are relative, given dynamic regional developments. I consider the 2015 budget realistic and believe that it is based on rather conservative analyses.”

Armenia’s budget is socially-oriented in terms of social expenditure.

“Social expenditures – family benefits, pensions, education and health – continue a rather high percentage in Armenia’s 2015 budget. Although we can say that social expenditure is not sufficient and the public is not satisfied with it, state budget expenditures are rather low and constitute a smaller share in the economy,” Ms Gyulumyan said.

Armenia’s authorities state that EEU membership will have a positive effect on Armenia’s economy.

“The economic growth budgeted for 2015 is higher than the growth actually expected this year. Another question is that a lower growth is budgeted than in that budgeted for 2014. Considering the above, the economic growth budgeted for 2015 is relatively high.

“A common economic area implies a freer access to a big market and equal conditions. As you know, Armenia is most integrated with Russia not only among the CIS member-nations. Russia is Armenia’s most important partner. However, to continue integration we should see the challenges facing Russia focus on the depreciation of the Russian rouble and sanctions against Russia. We should benefit from this big market.

“Without a common border with Russia, our task is to improve access to its market for our businessmen and reduce costs. RUB depreciation is an opportunity for Russian exporting companies to export their products. On the other hand, it blocks Russia’s imports from other countries,” the expert said.

Armenia’s Prime Minister Hovik Abrahamyan stated his intention to make big businesses pay taxes and create opportunities for small and medium enterprises. As to how the 2015 state budget reflects it, with no increase in tax revenues expected.

“The share of tax revenues in the GDP is not expected to increase. However, tax revenues are expected to increase by AMD 1bn. Two factors should be noted. First, by maintaining the share of tax revenues in the GDP, the government pledged to reimburse businesses for overpaid taxes, which is a burden on the budget.

“Therefore, more taxes have to be collected, which, however, will not be tangible on a yearly basis. By and large, 70-75 percent of budget revenues are due to large taxpayers, but small and medium businesses have their share as well.”