We envisage 7% economic growth for 2022 - Prime Minister
Prime Minister Nikol Pashinyan attended launch of the preliminary debates on the draft law of the Republic of Armenia "On the State Budget for 2022" at the joint sitting of the Standing Committees of the National Assembly.
In his speech on the draft state budget of the Republic of Armenia for 2022, Prime Minister Pashinyan, in particular, said,
“Distinguished Deputy Presidents of the National Assembly,
Dear members of the Government,
In August, we presented the Government's Action Plan for 2021-2026, which set ambitious goals for the peaceful, sustainable and inclusive development of the Republic of Armenia. Today we present the first budget of this five-year plan, which is called to lay a solid foundation for the implementation of our five-year plan. It outlines the necessary conditions for the implementation of the programs.
We envisage 7% economic growth for 2022. Despite the fact that most of the current year was marked by an unstable political and security environment, our economy today exceeds all the growth forecasts for 2021. On the other hand, the Gvernment hopes for more by the final results of the year.
I am pleased to note that in September 2021, an absolute record number of paid jobs was registered in the Republic of Armenia - 651,141 paid jobs. We have never had a higher index in Armenia. The previous maximum was registered in September 2020, amounting to 631 966 jobs. This year's index is by 3% higher than last year’s.
Under the light of the rather high 6.4% inflation this year, it’s important to note that the gross salary fund increased by 15.3% or 19 billion and 308 million AMD in September compared to September 2020, and the salary per capita increased by 11.9% or 23,782 drams. The export grew significantly, by more than 20%. Moreover, exports of not only mineral-raw materials, but also finished products and agricultural products have increased. The volume of construction has increased by 7% this year, and the growth of services as of September was more than 5%. These factors make the target of the 7% economic growth realistic, especially given that several major investment programs have already started and I hope that will be successfully completed, the primary goal of which is to transform Armenia from a country exporting mineral-raw materials to a country having a maximally long chain of metallurgy and metal processing.
According to the draft, 2022 budget revenues comprise 1 trillion 946 billion drams, which is higher by 17% compared to 2021 and by 25% compared to 2020. The expenditures comprise 2 trillion 190 billion drams, which is higher by 10% compared to 2021 and by 16% compared to 2020. The capital expenditures for 2022 comprise 347 billion drams, which is higher by 55% compared to 2021 and by 53% compared to 2020.
As I have said, the state budget for 2022 is based on three priorities: reform and improvement of the security system, development of infrastructure, modernization of education and science.
The defense budget for 2022, compared to the plan for 2021, is higher by 11%, amounting to over 345 billion drams. We will move consistently by the path of creating a professional army in Armenia, but we will do it smoothly, with well-thought steps, step by step increasing the attractiveness of military service, improving the image of officer and officer’s service, developing and improving the defense doctrine of the Republic of Armenia.
The protection of our country’s borders in this new security environment remains a key priority and we have set a task to year by year increase the involvement of the border guard units in the protection of the borders, with the vision of organizing the border protection only with border guard troops in the future. The withdrawal of the Azerbaijani Armed Forces from the territory of the Republic of Armenia, in particular, the Sotk-Khoznavar section, and the launch of demarcation of the delimitation process of the Armenian-Azerbaijani border, will create favorable conditions for the solution of this issue.
As for the defense strategy of our country, we have already emphasized in the Government Action Plan that the Republic of Armenia, like any peace-loving state, will develop and transform its Armed Forces not for aggression, but defending itself from aggression. The Republic of Armenia has no intention to conquer territories.
In terms of the development of the security system, it is important not only to modernize the defense capabilities of the army, but also to create a favorable external environment around the Republic of Armenia.
The consistent implementation of the agenda of opening an era of peaceful development for Armenia, Artsakh and the region, which we see through overcoming the atmosphere of hostility in our region, resumption of the negotiation process for the settlement of the Nagorno Karabakh conflict in the format of the OSCE Minsk Group Co-chairs, unblocking regional economic and transport infrastructure.
I have to state that the unblocking of the economic and transport infrastructure of the region can qualitatively change the content and structure of the economy of the Republic of Armenia, become an additional impetus for the development of domestic infrastructure, ensure long-term inclusive economic growth, creating equal conditions for Armenian citizens to engage in economic activity, significantly raise the attractiveness of our economy for local and foreign investments.
In parallel with the regional infrastructure developments, we will spend 32% more on the development of Armenian infrastructure in 2022 than in 2021, bringing the expenditures to be made in this direction to more than 278 billion AMD. It is planned to restore and repair 500 km of roads, design and/or build reservoirs of different sizes, which should significantly increase the volume and quality of irrigation water supply. The volume of work carried out to improve the quality of drinking water will increase by 35%, reaching 11.5 billion drams. The tenders for the Sisian-Kajaran and Kajaran-Agarak sections of the North-South highway will be launched, aiming to start the construction works of the two sections at the same time next year.
For ensuring the longevity of our state, long-term investments are needed in the field of science and education, which is a very important priority for us.
In 2022, the funding to be allocated to the Ministry of Education, Science, Culture and Sports will increase by 27%. This includes works to be done for the construction and design of educational facilities, which will continue the current construction works, many new educational institutions will be designed, including modular ones, which will ensure the construction of 300 schools and 500 pre-school institutions in the next 5 years. At present 51 schools and 76 kindergartens are already under construction, reconstruction or renovation.
In 2022, the funding of science alone will be increased by 83%, and the amount allocated for scientific thematic research will be 2.5-folds more, amounting to 6.7 billion drams. Our goal is to make a person's education and continuous development a way of life. This is the only way to be a competitive nation in the modern world. The development of science and technology is the logical continuation of this process, and here the Government is already introducing new funding formulas.
Increasing the funding in all spheres is a necessary but not sufficient condition. We realize that in order to implement our programs, we need not only economic interventions by the Government, but also social and cultural transformations.
First of all, we attach importance to increasing the efficiency of the public administration system, to transforming the work culture. Management should promote, not hinder, investment. Management should promote investments, not hinder it. In this regard, the culture of planning and implementation, the process of implementation of programs are important, the imperfection of which in many cases leads to under-performance of capital expenditures, and consequently to the slowdown in the implementation of the goals set by the Government.
In this regard, capacity development of the private sector has also a significant role, and the Government's efforts in this direction have begun to yield results in the face of companies that are investing in the field of public capital construction, thus striving to implement the programs with quality and timely. The increase of more than 50% in capital expenditures is a positive signal for private companies that can confidently invest in this field, increase their technical and professional capacity in the coming years.
In general, I would like to emphasize that the implementation of the Government and budget programs largely depends on the activity indicators of the private sector, and I want to inform you about a discussion that took place in the Government yesterday. In particular, you know that we have set a goal to implement a plan of putting up at least 1,000 hectares of intensive orchards every year for the next 5 years. But I think we all understand that the Government will not go and put up intensive orchards itself. In this regard, it is very important for us to be able to deliver these programs to the private sector, to find partners among the citizens and companies of the Republic of Armenia, who, understanding and accepting this political message, will make use of the tools created by the Government of financing and subsidizing the interest rates and will carry out this program.
I want to say that as a result of yesterday’s discussions, we decided that, the thresholds of such programs, particularly in the field of agriculture, should be raised, taking into account that so far, for example, we have set the maximum threshold in terms of Government assistance volume and packages for the establishment of smart barns and intensive orchards, in the sense that we aimed to support the establishment of smaller farms. But the indicators of the implementation of the programs tell us that we must expand those volumes. In other words, we should not only support those who want to plant relatively small orchards, small barns, but also those who want to make medium-volume investments, maybe a bit more than medium-volume. Because if we rely only on small economies, we may fail to achive, for example, the goal of having 1000 hectares of intensive orchards on annual basis. Although the Government will fulfill all its obligations, we will subsidize the interest rates, provide the funding, provide the cash return system, but in practice, people will not invest enough to be able to meet our targets.
The next important issue in this regard is the development of analytical skills, which will allow to increase the cost-effectiveness, investment efficiency, propper targeting of social programs, which is one of the most important issues. As a result, the confidence of the citizens of the Republic of Armenia that their taxes are spent more efficiently and targetted will increase. The citizens of Armenia must feel the impact of the Government measures on their lives every day; they must see that the implementation of the programs not only takes place at the level of announcments, but everything is done to implement them in practice.
I consider the development of analytical skills important for the continuation of the above-said in the following sense. We have, yes, very good social, economic, investment proposals, which are well-formulated and sound very good. But we also need to analyze the implementation of those programs, select, strengthen the programs that have a high rate of implementation and efficiency, maybe over time abandon those programs that have a lower rate of efficiency.
But for this, we need to be able to analyze the process of the programs implemented by us. In particular, for example, in the field of agriculture, we implement programs that can be considered a turning point in terms of their content. But we have to observe where they have led the Armenian economy and concrete economic operators, the agricultural economies, what problems have emerged in the process of implementing those programs, why they are not implemented at a sufficient level, or whether they are implemented at all, or what concrete results they bring.
Particularly, in the field of social protection and poverty alleviation, we launched a program in 2019 to provide 1,000 vulnerable families in the Republic of Armenia with livestock and other necessary services so that they can overcome poverty through work. We are now at a stage where we need to analyze what has finally changed in the lives of those 1,000 families. Did this program make a significant change in their social welfare, did their economy develop, or, conversely, did they quickly liquidate that livestock and find themselves in the same situation? Therefore, the development of the Government's analytical capacity is important not only in terms of designing and implementing new programs, specifying their targets, but also in terms of transforming the already adopted programs and making them more effective.
The 2022 budget will solve many key issues.
One of the landmarks I want to remind and emphasize is the following. According to our pre-election promise, for every third baby born after January 1, 2022, the Government of the Republic of Armenia will provide 50,000 AMD monthly as financial assistance, which will continue until the child turns 6 years old. This program is launching, I think this program is very important, even a beloved program. I hope that this will really be a serious support to our newly formed families, will help the families who already have 2 children to make a decision to become a large family.
However, it should be noted that we are far from the idea that the 2022 state budget will solve all the problems we face. Accordingly, many issues, including social ones, will remain unresolved. In order to thoroughly solve the problems of poverty and social protection, we need strong economic and security bases, and we will create those bases in the next few years.
In the 2022 budget, we sought to carefully balance the Government's priorities while ensuring the management of various fiscal risks. We set our strategic goals and the priorities for their implementation in a way that the implementation of each of them creates the basis for the effective implementation of the others. We are confident that the Government's Action Plan will be successfully implemented to ensure the security, welfare and dignified life of the citizens of the Republic of Armenia.
Thank you, dear colleagues, I wish you effective and constructive discussions of the 2022 budget”.