The Armenian government is grappling with a significant shortfall in tax revenue for 2024, with collections falling short of expectations by 200 billion drams ($506 million), Finance Minister Vahe Hovannisyan announced on Wednesday. The shortfall represents nearly 8 percent of the tax revenue target set in the state budget.
Hovannisyan attributed the deficit to slower-than-anticipated economic growth, which is projected at 5.8 percent this year. This marks a sharp decline from the 12 percent growth recorded in 2022 and the 8 percent in 2023, both fueled largely by Armenia’s role in re-exporting Western goods to Russia and facilitating exports of Russian diamonds and gold to global markets.
Despite the shortfall, Hovannisyan reassured the public that no capital projects have been entirely canceled. However, the government has had to reduce current and capital expenditures and draw from its Reserve Fund to bridge the revenue gap.
Economists have suggested that the slowdown in tax revenue growth may stem from the limited scope of re-export benefits, which primarily favor a small group of individuals rather than generating widespread economic gains.
The government has tempered its expectations for 2025, forecasting a growth rate of 5.1 percent. Hovannisyan emphasized the need for tighter public spending and renewed efforts to combat tax evasion.
The International Monetary Fund has echoed these concerns, noting in November that Armenia’s economic growth is stabilizing to “more sustainable levels” as the effects of temporary factors, such as sanctions-driven re-exports, wane.
