Fitch Ratings has affirmed Armenia’s Long-term foreign and local currency Issuer Default Ratings (IDR) at ‘BB-’ with a Stable Outlook.

The Country Ceiling has been affirmed at ‘BB’ and the Short-term rating at ‘B’.

“The affirmation reflects the following factors: The consolidated general government deficit fell to 1.4% of GDP in 2012, down from 2.8% of GDP in 2011, outperforming the target for the second successive year.

The government succeeded in meeting its goal of increasing tax revenues, although under-execution of capital spending also contributed, by 1.2pp of GDP. The deficit will increase again in 2014 due to the costs of introducing a pension reform, estimated at 0.5% of GDP in the first year. General government debt rose 1.8pp of GDP to 44.1% of GDP in 2012, but Fitch expects it to stabilise from 2013 onwards. Growth slowed in Q213, but Fitch expects it to reach 5% in 2013-15, higher than its previous forecasts,” the statement reads.

“Serzh Sargsyan won a second term as president in February 2013, completing a smooth election cycle and pointing to policy continuity. However, an angry popular response to a proposed rise in public transport fares in Yerevan suggests dissatisfaction and latent political risks. Armenia's rating is supported by a relatively strong macroeconomic framework and a good inflation track record in comparison with the peer group of ‘BB’ rated sovereigns. Fitch assumes that Armenia continues to enjoy broad social and political stability, and that there is no significant worsening in tensions with Azerbaijan surrounding Nagorno-Karabakh.”