The potential economic consequences of Armenia leaving the EAEU are not fully covered by the risks assessed in the state budget. If the bloc imposes severe restrictions, Armenia’s economy could contract by 2.7% instead of achieving the planned 5.8% growth. In that case, the budget could lose around AMD 240 billion in tax revenue. Former Finance Minister Vardan Aramyan presented this assessment while discussing budget risks and the potential consequences of leaving the EAEU.
According to Aramyan, the Ministry of Finance assessed a range of risks during budget planning and allocated reserve funding. In particular, he says, a reserve fund of approximately AMD 65 billion has been planned to address certain problems should they arise.
However, those calculations do not include a possible EAEU exit and a subsequent sharp deterioration in the economic environment.
“In any scenario, you assume that, all other things being equal, the existing situation will continue. But the scenario in which we leave the EAEU is not fully represented among those risks,” he said.
Aramyan says the risk assessment also does not fully calculate, for example, the impact of possible gas price increases. It remains unclear what political decisions might be taken and how extensive the changes could be.
Rapid growth in current spending limits budget flexibility
The former minister considers the insufficient effectiveness of the sources of economic growth one of the main problems affecting the state budget’s structure. He says a significant share of growth comes from capital construction and service activities, which could be vulnerable to changes in external conditions.
In Aramyan’s assessment, a country without a clear competitive advantage in technology, healthcare or tourism could face serious difficulties if external conditions deteriorate.
“If you are not a center of technological excellence, a center of healthcare excellence like Germany, for example, or a center of tourism excellence like Greece, you will naturally face difficulties if the external environment changes,” he said.
Aramyan also draws attention to rising current expenditure. According to the figures he presented, it is increasing by approximately AMD 698 billion compared with 2025 — close to AMD 700 billion.
He emphasized that current spending is much harder to cut than capital expenditure. It includes spending on healthcare, social security, pensions and public sector salaries.
The former minister says the increase in the wage bill should also be considered in this context. He noted that, under the overall economic classification, the wage bill is growing by around AMD 50 billion compared with 2025.
In Aramyan’s assessment, a deterioration in economic conditions could force the government to reduce capital expenditure, since cutting current spending would be much more difficult.
Around AMD 240 billion in lost tax revenue
Aramyan also presented an illustrative calculation of the possible consequences of leaving the EAEU. He stressed that it concerns the worst-case scenario, in which restrictions are introduced simultaneously, in full and across all areas.
According to him, Armenia’s economy could then contract by 2.7% instead of achieving the planned 5.8% growth. The gap between projected growth and a possible contraction would therefore be 8.5 percentage points.
Aramyan calculates that each percentage point of GDP growth or contraction corresponds to approximately AMD 113 billion. Tax revenue accounts for around 24–25% of that amount. This means the budget could receive approximately AMD 27–28 billion less in tax revenue for each percentage point.
“If it is 8.5 percentage points, we need to multiply that amount by 8.5. We are talking about a loss of approximately AMD 240 billion in tax revenue,” he said.
According to Aramyan, this risk is particularly concerning against the backdrop of the increase in current spending already planned. If expenditure rises by hundreds of billions of drams while tax receipts fall, maintaining the budget’s balance could become a serious challenge.
Aramyan also addressed the argument that tax revenue is expected to increase in 2027. He says planned revenue growth cannot automatically guarantee the necessary receipts if economic conditions deteriorate.
He identified two principal risks. The first is a shrinking tax base resulting from declining economic activity. The second is weaker tax compliance.
“When the economic situation deteriorates, tax revenue is not the only thing that falls: tax compliance also declines. Businesses’ primary concern becomes simply surviving, and they may try to avoid their tax obligations,” the former minister said.
According to Aramyan, it would be difficult in such circumstances to maintain even a tax-to-GDP ratio of 24.5–25%, as tax receipts could fall more sharply.
He emphasized that decisions about the future of relations with the EAEU should take potential economic consequences into account.
“Whether we decide to move in this direction or another — let the people decide. But saying that nothing will happen without considering the possible consequences is reckless,” Aramyan concluded.