Prime Minister Nikol Pashinyan attended the launch of preliminary discussions of the RA State Budget bill for 2020 at the joint sitting of the NA Standing Committees.
Addressing the meeting, the Prime Minister stated;
“Honorable National Assembly Vice Presidents,
Esteemed Mrs. Tandilyan,
Dear Colleagues,
I am glad to see you today. We are proceeding to the parliamentary debate of the 2020 State Budget bill of the Republic of Armenia. Madam Tandilyan, first of all, I would like to refer to your opening remarks, in which you voiced the hope that the 2020 budget would be finalized to reflect the programs of the government. As a matter of fact, both the 2019 budget bill and its exercise reflect the government’s programs.
Last year we had a similar talk on this topic in this hall. The draft 2019 budget projected a 4.9 percent growth rate as the government’s forecast for 2019, but if we look at our economic indicators for January-September, we will notice that the expectation for economic growth is much higher today. Then comments were voiced that we were guided by a more conservative scenario, and I think it right. Instead of looking at the most optimistic forecast, we abide by a conservative approach to ensure macroeconomic stability. In this regard, we dealt with the same problem in 2018, as the budget bill envisaged a 4.5% economic growth rate, while in fact we provided 5.2%
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In general, I think this is the right approach, which provides for a more sustainable macroeconomic environment. We discussed this approach with the Minister of Finance yesterday. We are guided by the well-known principle: “надейся на лучшее, готовься к худшему.” Therefore, I think that the right policy is being pursued in this regard, especially considering that we already have 7.1 percent economic activity in the first 10 months of 2019.
It seems to be obvious that we will have about 7% economic growth, but if you look closely, you will see that the Ministry of Finance eyes a 6.3% economic growth rate this year, although the Central Bank estimate is 6.9%.
That is: 7% plus-minus 0.1% and I would also like to draw your attention to the estimates presented by international organizations. The International Monetary Fund, the World Bank and the Asian Development Bank have upgraded their estimates of economic growth in Armenia. The original forecasts have improved to indicate higher growth for Armenia in the medium term. Accordingly, I would like to emphasize that in the first 10 months of 2019 we boasted a 9.7% growth rate in industry, 4.4% in construction, 8.8% in trade turnover, 15.5% in services, and 5.7% in the average monthly wage, of which 7.6% in the public sector and 4.6 percent in the private sector.
Export volumes are very important, as we have a 7.9% growth in exports for the past 10 months, though we faced export-related bottlenecks earlier this year. We had a 3% fall, but we were confident and are still confident that we can meet the proposed targets. As much important are the consumer price index and inflation, with the latter standing at 1.6%.
Generally speaking, economists are upset when inflation is high and just as upset when inflation is low. I think 1.6 percent is just the figure that will give our esteemed economists a certain sense of comfort, at least I hope so.
We have some problems with the indicators in agriculture. In the first ten months of this year, we stated 95.2% gross agricultural product, which implies a 4.8% decline, but I would like to talk about one nuance in agriculture.
You may know that we have had a problem with the import of brandy alcohol. The Republic of Armenia used to import brandy alcohol for many years, which in many cases led to unreliable indicators of grape procurements. The above scheme is no longer functional, and the volume of grape procurements is stated more accurately now. But I want to say that we also have good news about agriculture. According to preliminary operational data, in the past 10 months of 2019, we saw a 15% increase in the exports of vegetables and a 3.3% rise in the exports of animal products. This is the macroeconomic framework. I would like to state that the economy in the Republic of Armenia is still in a very good mood, which is crucial.
I would like to draw your attention to the fact that the global economic trend in recent years was that people’s moods and economic behavior turned out to be a major factor in economic activities. That is, figures, equations and formulas are somehow falling short of consumer trends, and I would like to state here that we have a very high economic mood in our country.
Now, I would like to refer some budget revenue and expenditure indicators. AMD 1,602 billion is planned in budget revenue in 2020 and I wish to point out that we have a 27.4% growth in revenue as compared to 2018. This is extremely important.
Why as compared to 2018, because I set specific growth targets following the revolution. While there are some deviations in decimal expression, but if we take a look at this year’s experience, we can hope to achieve much more serious performance indicators.
In terms of expenditure, we have exactly what we projected before and during the revolution. Spending grew by 29.9 percent, which is a 30 percent increase in the budget. It is important to state how much growth we have in human capital as compared to 2018. To be honest, the figures proved impressive to put it mildly as we have a 33 percent increase in healthcare allocations as compared to 2018.
In education, science, culture and sports, we have managed a 41% growth, coupled with a 21% rise in labor and social affairs.
There has been a lot of talk recently about defense spending. I would like to stress that we have planned a 25.3% increase in defense spending as compared to 2018. As far as military spending is concerned, I wish to note that we are bound by regulatory standards, which stipulate that military spending should not exceed 4 percent of GDP, and we must stay within that. But it is as much important to note that in 2020 we will face military costs slightly different from the proposed rationale.
I have made several statements to that effect, and I hope that the recent changes will help us record tangible results of the fight against corruption, which in turn will help upgrade the country’s defense capacity.
I consider it important to note that we look forth to increased economic activity and improved social status following the Tax Code amendments. You know that the amendments to the Tax Code shall come into effect on 1 January, 2020.
On the social side, it is important to note that some 200,000 citizens will benefit from the expected rise in salaries following the Tax Code amendments. It will not come as a nominal rise in salaries, but due to the fact that we have set a flat income tax rate in the Tax Code, the monthly income of approximately 200,000 citizens will actually increase as a result of the proposed changes.
In addition, we will have an average pension increase of 10%. Starting July 1, 2020, we will raise the amount of lump-sum child birth allowance to 300,000 drams. 50,000 and 150,000 drams are currently paid for first and second children, but these figures will increase. We will raise to 25,500 drams the amount of childcare allowance for up to 2 years-old children instead of the currently applicable 18,000 drams.
Programs aimed at boosting fertility and birth rate will be implemented; teachers’ salaries have already been increased, and this will naturally continue into 2020, which implies that the 10% increase will remain in force.
There is a 10% increase in the average salary of law enforcement officers, a 30% increase in wages paid to the staff of the Ministry of Emergency Situations, and a 20,000 increase in salaries for foresters and rangers.
You may know that we have reconsidered our policy with regard to the disaster zone, and we have allocated 3 billion drams to solve the housing problems of disaster zone residents in 2020. We are currently discussing various models, and some of these models will be tested this year,
As a whole, I should stress once again that you will notice some conservative approaches in the draft budget concerning the economic growth rate, which may actually be slightly lower in the light of our political and economic ambitions.
In the Medium Term Expenditure Framework adopted this year, we have stated that the political objective is to move on to the high-growth model, and that model is actually set for the period 2020-2022. We hope to achieve 7, 8 or 9 percent growth rates respectively.
To be honest, I consider this to be realistic, given the moods we have in our economy today. I do believe that today the economic revolution is gaining momentum in the Republic of Armenia: it is a reality, and that the revolution can now be seen with the naked eye, as well.
Huge investments are being made in Armenia. Of course, our biggest challenge is to meet the capital expenditures we have planned. But I would also like to note that notwithstanding the stated controversial shortfall in capital spending, we have already seen a tangible increase in actual capital expenditures as compared to last year.
Now I want to clarify the reasons behind the shortfall in capital spending. Firstly, as I have repeatedly pointed out, it has to do with the fight against corruption. If formerly the so-called kickbacks were a universally accepted behavior, today it cannot be considered a reality. I cannot rule out the recurrence of such phenomena, but the officials involved must be sure that they shall be prosecuted sooner or later, and no one should doubt that they cannot avoid responsibility.
And secondly, I can see the following problem in terms of medium and long-term capital expenditure: standards need to be raised in our country, because as strange as it may seem, society keeps providing very positive feedback on road-building issues.
I would like to emphasize that I myself am dissatisfied with the road-building standards accepted in Armenia. But now we have a huge change in the quality of road-building, yet we cannot put up with the applicable standards, and we need to upgrade them as soon as possible.
In general, we must overhaul the standards in all areas of public life; we must raise the standards of our own work. We must raise the standards in the government, in the National Assembly, local government, police, law enforcement, investigative bodies and so on. Of course, there will be such nuances in this process as may seem unclear or unusual at first glance in terms of their motivation and effectiveness, but I think changes will prove effective over time.
We need to markup the rating of state service. Of course, we cannot do it in one go and at once, but we must push ahead with this process in the fields of social security, education, healthcare and in all other areas.
Dear Colleagues,
Let me say that as the Prime Minister of the Republic of Armenia, I am now optimistic and confident more than ever about the development and future of Armenia’s economy. The economy of the Republic of Armenia has gathered a strong momentum, and we all need to do everything not only to avoid a slow down in the pace, but also to speed it up. The socioeconomic reforms and the proposed changes should proceed faster and more effectively in Armenia, so that they could be tangible for every citizen of the Republic of Armenia. Thank you.”
INFORMATION AND PUBLIC RELATIONS DEPARTMENT OF THE OFFICE OF THE PRIME-MINISTER OF THE REPUBLIC OF ARMENIA