Moody's Investors Service has downgraded Armenia's long-term issuer and senior unsecured debt ratings to B1 from Ba3. Concurrently, Moody's has changed the outlook to stable from negative.

The key drivers for the downgrade to B1 are:

1. Armenia's increasing external vulnerabilities stemming from (a) declining remittances from Russia that have not yet bottomed out, (b) an uncertain outlook for foreign direct investment (FDI) inflows that collapsed in 2015 and (c) an elevated susceptibility to renewed pressures on the local currency and the country's foreign exchange reserves;

2. Armenia's worsening fiscal and government debt metrics and the expectation that Armenia's general-government-debt-to-GDP ratio will rise above 50% in 2017 under the baseline assumption of a growing economy.

The stable outlook reflects Moody's expectation that downside and upside risks to Armenia's credit profile are broadly balanced at the new, lower rating level of B1.

In the same action, Moody's has also lowered Armenia's long-term foreign-currency deposit ceilings to B2 from B1 and the long-term local-currency bond and deposit ceilings to Ba2 from Ba1. At the same time, the long-term and short-term foreign-currency bond ceiling and the short-term foreign-currency deposit ceilings remain unchanged at Ba2/NP and NP, respectively.