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+”.

At the same time, Fitch affirmed the Country Ceiling at “BB-” and the Short-Term Foreign-and Local-Currency 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,” the agency writes.

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. We expect growth to average 3,6% in 2018-2019 due to a still favorable 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. Fitch expects the general government deficit to narrow further to 3% in 2018 and 2,7% in 2019,” analysts of the agency suggest.

Fitch’s projections for the budget deficit and growth performance are consistent with stabilization in government debt. They forecast debt to rise to 57,5% of GDP in 2017, slightly below the projected 58.6% “B” median, peak in 2018 at 58,1% and gradually decline thereafter. Armenia’s government debt structure has a high level of concessional debt (66% of total debt), but 81% is foreign currency-denominated, exposing it to exchange rate volatility.

“Domestic demand-driven import growth will be balanced by export receipts underpinned by stable commodity prices, diversification to new markets and stabilization of the Russian economy benefitting export and remittances growth,” Fitch’s statement reads.