Armenia's budget deficit will average around 3.3% of GDP in 2026-2029 – S&P
23.02.2026,
12:19
Armenia's budget deficit will average around 3.3% of GDP in 2026-2029, according to a report by the international rating agency S&P Global Ratings.
YEREVAN, February 23. /ARKA/. Armenia's budget deficit will average around 3.3% of GDP in 2026-2029, according to a report by the international rating agency S&P Global Ratings.
"While the 2025 budget projected a deficit of around 5.5% of GDP, the actual result was just below 4% of GDP, primarily due to under-utilization of planned capital expenditures. Therefore, the 2026 budget projects a smaller deficit of approximately 4.5% of GDP, assuming real economic growth of around 5.5%," the study states.
S&P analysts note that the balance of spending priorities is being reconsidered: capital investment is being maintained at a high level to support medium-term growth, while defense spending is planned to be reduced both in nominal terms and as a share of GDP, reflecting the reduction in perceived short-term security risks following the peace talks with Azerbaijan.
It is noted that social spending remains targeted, including continued support for displaced persons and vulnerable households.
"We project the general government deficit in 2026 at 4.2% of GDP, below the official target, based on our assumption of underutilization of capital spending, although this will likely be partially offset by pre-election pressure for increased spending," the report states.
The authors of the report, as in recent years, expect the deficit to be financed primarily through a combination of domestic borrowing and external concessional financing. As Armenian Finance Minister Vahe Hovhannisyan previously stated, the authorities plan to reduce the budget deficit from 5.5% to 4.5% in 2026, to 3.5% in 2027, and to 1% by 2030.
"While the 2025 budget projected a deficit of around 5.5% of GDP, the actual result was just below 4% of GDP, primarily due to under-utilization of planned capital expenditures. Therefore, the 2026 budget projects a smaller deficit of approximately 4.5% of GDP, assuming real economic growth of around 5.5%," the study states.
S&P analysts note that the balance of spending priorities is being reconsidered: capital investment is being maintained at a high level to support medium-term growth, while defense spending is planned to be reduced both in nominal terms and as a share of GDP, reflecting the reduction in perceived short-term security risks following the peace talks with Azerbaijan.
It is noted that social spending remains targeted, including continued support for displaced persons and vulnerable households.
"We project the general government deficit in 2026 at 4.2% of GDP, below the official target, based on our assumption of underutilization of capital spending, although this will likely be partially offset by pre-election pressure for increased spending," the report states.
The authors of the report, as in recent years, expect the deficit to be financed primarily through a combination of domestic borrowing and external concessional financing. As Armenian Finance Minister Vahe Hovhannisyan previously stated, the authorities plan to reduce the budget deficit from 5.5% to 4.5% in 2026, to 3.5% in 2027, and to 1% by 2030.
