Fitch Ratings Agency has affirmed Armenia's long-term foreign and local currency Issuer Default Ratings (IDRs) at 'B+' with a Stable Outlook, the agency website reports. Other ratings have also been affirmed: the issue ratings on Armenia's senior unsecured foreign currency bonds were reated at 'B+', the Country Ceiling neing affirmed at 'BB-' and the Short-term foreign currency IDR at 'B'.

Fitch forecasts Armenia’s GDP growth at 2% in 2016, before picking up to 2.8% in 2017.

Armenia's ratings are supported by its relatively high human development, favorable business climate and economic resilience. However, it’s necessary to consider the vulnerabilities to external shocks, high levels of external and foreign currency debt and political risks. 

Armenia was significantly affected by the recession in Russia and drop in global commodity prices. Thus, in 2014, Russia accounted for 80% of remittances (14% of GDP), 20% of exports and 44% of FDI. In January-September, total remittances dropped by 33% (4.5% of GDP).  Copper accounted for 22% of exports, while in December 2015 its price went down by 28%.

 Nevertheless, Armenia has proved resilient to such shocks, maintaining a strong trade performance, access to international financing and an effective policy response. However, in light of unclear expectations regarding the oil prices, it is too early to declare the external shocks have been overcome.

According to the agency’s estimates, the current account deficit narrowed to 4.3% of GDP in 2015, from 7.3% in 2014. 

As to the foreign exchange reserves, if they totaled USD 1,261mln in February 2015, in December 2015 their number amounted to USD 1,771mln. This was helped by the issue of a USD 500 mln eurobond in March, as well as USD 100 mln from the Eurasian Fund for Stabilization and Development, as well as funding from the IMF and World Bank.

In a year the public debt increased to 47.8% from 43.6%, which is below the 'B' category median of 52%.

Nearly 85% of Armenia’s government debt stock is in foreign currency, exposing the country to currency rate-related risks.   But it has a long average maturity of 9.7 years and much of it is concessional at low interest rates.

Thus, recovery in the Russian economy and drop in the level of government debt can positively impact Armenia, the main risk factors being deterioration of relations with Russia, drop in oil and metal prices, as well as decrease in internal reserves and tax revenues.