Renewed recession in Europe could slow Armenia’s ongoing economic recovery and complicate a sizable increase in tax revenues planned by the Armenian government, Finance Minister Vache Gabrielian said on Monday.
After sluggish growth registered in 2010 the Armenian economy is on course to expand by 4.6 percent this year. The government has forecast a growth rate of 4.2 percent for next year.
Continued growth is essential for the success of its plans to raise tax revenues by 13 percent in 2012. This, coupled with a more modest rise in public spending, is meant to cut the state budget deficit to a level equivalent to around 3 percent of Gross Domestic Product.
“If there are cataclysms coming from European countries, if agriculture suffers catastrophic changes as a consequence of weather conditions, naturally there could be some problems [with meeting these targets,]” Gabrielian told a news conference. He said “big problems” resulting from the sovereign debt crisis in the European Union would affect the entire world.
The EU’s executive European Commission said last week that aggregate economic growth in the 17 countries using the euro as the national currency will make up 0.5 percent in 2012, down from its earlier projection of 1.8 percent.
“The recovery has now come to a standstill and there’s the risk of a new recession unless determined action is taken,” Olli Rehn, the EU’s economic and monetary affairs commissioner, warned.
Armenia was already hit hard when Western economies slid into recession in late 2008. Its GDP shrunk by as much as 14 percent in 2009 amid plummeting international prices of base metals and remittances from Armenians working abroad.
Gabrielian insisted at the same time that as things stand now the government’s draft budget for 2012 submitted to parliament last week is “realistic.” He downplayed concerns about its revenue target publicly expressed by Gagik Khachatrian, head of the State Revenue Committee.
“In your day-to-day life you always have concerns,” Gabrielian said. “But that doesn’t mean you don’t take one or another action.”
The government and the Ministry of Finance in particular say that a large part of the extra revenues will be generated by fresh amendments to Armenian tax legislation that are also likely to be approved by the National Assembly before the end of this year. The government-drafted amendments would, among other things, raise income tax for wealthy Armenians and impose higher duties on expensive cars and alcohol.