Central Bank of Armenia: 2027 budget to moderately restrain demand

The Central Bank of Armenia assesses the fiscal policy in the draft 2027 state budget as moderately restrictive and countercyclical, and consistent with medium-term fiscal consolidation. The Central Bank Board approved its opinion on the draft budget on October 1.

According to the opinion, the 2027 budget deficit is planned at 3.4% of GDP, 0.6 percentage point below the level expected for 2026. The tax-to-GDP ratio will rise to 25.4%, current spending will fall to 24.3% of GDP, and capital spending will rise to 5.6% of GDP. The government expects 5.8% economic growth in 2027 and estimates that potential growth has accelerated to 5.0–5.5%.

Government debt is set to rise by about 0.7 percentage point to 47.2% of GDP in 2027, remaining below the 50% threshold. In 2026, it is expected to fall from 47.2% to 46.5% of GDP.

The Central Bank notes that the budget provides a reserve fund of 0.3–0.6% of GDP and a liquidity buffer of 1% of GDP on the treasury stabilisation account in case risks materialise. It considers clear limits on the use of reserve funds important, so that they are used only for additional financing needs arising from macroeconomic and other significant fiscal risks.

The Central Bank estimates the 2026 budget deficit at about 4% of GDP, or AMD 504.2 billion (about $1.39 billion at the October 5 exchange rate), compared with the planned 4.5%. In January–August, the budget posted a surplus of about AMD 18 billion, against a deficit of about AMD 61 billion a year earlier. Tax revenues grew by about 14.5% and spending by 9.9%: current spending rose 17.8%, while capital spending fell 25.6%.

Economic activity grew by about 7.3% in January–August, and 2026 growth is expected at 5.6%, about 0.2 percentage point above the budget forecast. Annual inflation stood at 4.4% in August. The Central Bank kept the refinancing rate at 6.5% in the first half of 2026 and then raised it by 0.25 percentage point to 6.75%.

The Central Bank stresses that ensuring and strengthening macroeconomic and price stability will remain the main goal of fiscal and monetary policy in 2027 and over the medium term.