Moody’s reduced Armenia’s Ba2 government foreign and local currency issuer ratings from stable to negative.

The changes reflected risks to Armenia’s growth outlook in the coming years given the anticipated economic slowdown in Europe and Russia, its main trading partners, and the impact of potentially weaker commodity prices for the country’s mining and metals industries, says the press release issued by the agency.

Reduction is also conditioned by concerns about the deterioration of Armenia’s debt metrics and external position following the 2009 recession and its impact on the country’s shock-absorption capacity as it enters another period of heightened economic uncertainty.

Despite the change in outlook, Moody’s notes the government’s commitment to fiscal consolidation, as illustrated by the measures contained in the draft 2012 budget law which are aimed at reducing the general government deficit to 3.1% of GDP next year. These measures are in addition to the government’s efforts to enhance the efficiency of tax collection. The impact of such measures however will remain unclear for some time and the implementation risks to the fiscal consolidation plan are significant, particularly given the uncertainty surrounding Armenia’s growth prospects. As discussed above, the expecteed economic slowdown in Europe and Russia poses risks to Armenia’s growth outlook.