News
Newsfeed
News
Thursday
March 28
Show news feed

Fitch Ratings has affirmed Armenia's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at “B+” with a Positive Outlook.

Armenia’s ratings balance a credible monetary policy framework and stronger income per capita and governance indicators relative to peers against high public and external debt and tense relations with some neighbouring countries.

The Positive Outlook reflects Armenia’s stronger growth outlook relative to peers, the start of a fiscal consolidation process that we expect will deliver a gradual decline in government debt over the medium term, and institutions that have underpinned macroeconomic and financial stability through a period of significant political change.

Fitch projects the state budget deficit to decline to 2.2% of GDP (4.3% current peer median) from 4.8% in 2017, and a target of 2.7%.

The new government is reviewing spending across all areas to understand its structure and pinpoint inefficiencies, which has slowed execution. Fitch expects a widening of the deficit to 2.6% of GDP in 2019 and 2020, slightly above the 2.2% and 2.3% government projections, reflecting our expectation of slower revenue growth and faster execution of expenditure.

Fitch projects a small primary surplus in 2018 and a broadly balanced position in 2019 and 2020, supporting a gradual decline in public debt. General government debt/GDP is forecast to fall to 56.2% at end-2020 from 58.9% at end-2017, compared with a current “B+”; median of 60.5%. D

Armenia has continued to demonstrate macroeconomic and financial stability throughout this year’s political volatility as well as increased geopolitical tensions related to Russia and increased emerging market risk aversion, reflecting the policy framework’s credibility and improved capacity to absorb economic and political shocks.

 Inflation (2.8% in October) has remained below the central bank’ss medium-term target of 4%.

Economic growth is moderating, but remains robust and is forecast at 5% in 2018. Growth is forecast to ease to 4.2% in 2019 and 4.0% in 2020, with the forecast 2018- 2020 average of 4.4% higher than the 3.6% current “B”; median for the same period. The halt to construction of a foreign-owned gold mine due to local residents’; protests over environmental concerns has created some uncertainty about prospects for the sector.

The banking system remains stable and did not experience destabilising liquidity pressures in April-May.

Fitch assumes that Armenia will continue to experience broad social and political stability and that there will be no prolonged escalation in the conflict with Azerbaijan over Nagorno-Karabakh to a level that would affect economic and financial stability.

Fitch assumes that the Russian economy will grow 1.5% in 2019 and 1.9% in 2020.

!
This text available in   Հայերեն and Русский
Print
Read more:
All
Photos