Fitch Ratings has revised Armenia's outlook to Positive from Stable, while affirming the sovereign's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B+'.
The economy is experiencing a strong recovery following a large external shock in 2014-15, driven by a structural improvement in export performance, firmer external demand conditions and recovering remittances, and supported by a credible monetary policy framework.
Fitch has revised up its growth projection to 4.3% for 2017 from 3.4% previously, as GDP growth averaged 5.3% in 1Q-3Q. Fitch expects growth to average 3.6% in 2018-2019 due to a still favourable environment for remittances and export growth.
Armenia has started to implement strong fiscal consolidation. Fitch forecasts the general government budget deficit will shrink to 3.3% of GDP in 2017, from 5.5% in 2016, reflecting expenditure restraint and favourable revenue growth.
Domestic demand-driven import growth will be balanced by export receipts underpinned by stable commodity prices, diversification to new markets and stabilisation of the Russian economy benefitting export and remittances growth. A moderate current account deficit mitigates external vulnerability arising from commodity dependence and the small size of the economy. It will also lead to the stabilisation, and then gradual reduction, of the country's high net external debt at 44.8% of GDP by end-2017 versus 20% for the 'B' median.