During election years, governments are typically inclined to increase spending — especially in the social sphere — to boost public support and confidence. However, in Armenia this time the trend is the opposite: the reduction of the 2026 budget deficit is being achieved through cuts in government expenditures.
The government plans to limit borrowing compared to the previous year, and a significant part of the spending cuts also affects the defense sector. At the same time, officials have announced a forecast of 5.4% economic growth for next year. How will the government reconcile the goal of sustaining growth with a policy of reduced spending? Former Minister of Finance Vardan Aramyan shared his view on this issue.
A net outflow of investments: about 44 billion drams in one year
Aramyan emphasized that the projected 5.4% economic growth should be viewed within its structural context. According to him, much of the expected growth is concentrated in the industrial sector, which the government mainly attributes to the launch of the Amulsar mine.
Here, the expert said, there is both good and bad news. The good news, according to Aramyan, is that the economy has inertia, and a sharp slowdown would require a significant external shock.
“In other words, by the end of the year, we are likely to exceed the projected 5.2–5.4% growth rate,” he noted.
At the same time, Aramyan pointed to several risks. He focused on investments, which are essential to achieving the projected figures.
“When we look at domestic investments, they tend to grow more slowly and modestly than consumption. Excluding public investments, the growth rate of private investments has been relatively modest in recent years — and that is a worrying factor,” he said.
The former minister noted that last year there was a net outflow of foreign direct investments in the real sector — around 44 billion drams — and such a situation, he said, was not unexpected.
Non-transparent deals scare away investors
Aramyan stated that non-transparent transactions, such as those surrounding Kajaran and Amulsar, negatively affect foreign investors’ confidence.
“It’s not about the sector — it’s about clarity,” he said. “Investors look beyond macroeconomic indicators and security factors; they also consider transparency. The presence of opaque actions creates risks related to arbitrary or unpredictable government decisions, reducing investor trust.”
He also stressed that financial institutions are sensitive to such issues:
“Recently, some members of parliament voiced concern that people are being arrested for public statements. These cases also have an impact on economic processes,” he said.
Aramyan concluded that these circumstances form part of the broader risks associated with economic growth and privatization:
“These are serious risks that could affect the pace of economic growth,” he concluded.