The Armenian government’s tax revenue fell short of its target in the first half of this year, despite strong economic growth. The State Revenue Committee (SRC) collected nearly 1.19 trillion drams ($3.1 billion) in taxes, which is 117.4 billion drams ($300 million) less than projected in the 2024 state budget.
Neither the SRC nor the Finance Ministry has explained the shortfall. It’s unclear if tax authorities will address it in the second half of the year, increase the budget deficit, or cut spending.
The deficit was expected to rise to 4.6 percent of GDP in 2024 due to a 23 percent surge in public spending. The budget plans for 3.2 trillion drams in expenditures and just over 2.6 trillion drams in tax revenue.
Despite the tax shortfall, Armenia’s GDP grew by 9.2 percent in the first quarter and remained strong in April and May. The economy grew by 12 percent in 2022 and 8 percent in 2023, largely due to re-exporting Western-manufactured goods to Russia amidst Western sanctions.
According to Armen Ktoyan, a senior professor at the Armenian State University of Economics, the growth from re-exports mainly benefits a narrow group and doesn’t translate into increased tax revenue. He noted, “We are seeing structural changes in our economy that do not increase its viability. We are becoming largely a re-exporting, service-based economy.”
