Fitch Ratings affirmed Yerevan’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at B+ with stable outlooks.

At the same time, Yerevan’s Short-Term Foreign Currency IDR was rated at B.

According to the agency, Yerevan’s ratings are constrained by those of Armenia (B+/Stable), in particular “by the country’s institutional framework for local and regional governments (LRGs), which Fitch assesses as weak”. Moreover, ratings also factor Yerevan’s capital status, its satisfactory budgetary performance, supported by steady transfers from the central government, and its zero debt.

Fitch expects the city to continue posting a satisfactory fiscal performance with a lower single-digit operating margin in 2017-2019 (1.6% in 2016).

“The city’s operating revenue adjustment to negative shocks resulted from the protracted slowdown of Armenia’s economy in 2014-2015 is likely to continue. We also expect Yerevan to run close to a balanced budget in 2017-2019 in line with historical results (2012-2016: average deficit 0.15%),” the agency informed.

Yerevan’s 2016 operating revenue was AMD 77.3 billion, underpinned by steady flow of transfers and locally collected taxes. According to Fitch, Yerevan continued to receive financial support from the central government and current transfers will remain stable at about 75% (2015: 76%) of Yerevan’s operating revenue.

“The city’s capex continued its downward trend in 2016, decreasing to AMD5.7 billion, or 7% of total spending. We expected this capex decrease, as the city completed material infrastructure investments funded by state transfers and donor grants,” the agency stated.

According to Fitch, Yerevan will continue funding capital outlays with asset sales and capital transfers from the central government.

“Yerevan benefits from its capital status. It is the country’s economic and financial centre and its largest market with a developed services sector and the country’s largest metropolitan area. The city accounts for 36% of Armenia’s population. At the same time, Yerevan’s wealth metrics are low in the international context. We estimate Yerevan’s GRP per capita at AMD1.8 million in 2015 (USD 3,770),” Fitch analysts concluded.

It’s worth reminding that Fitch Ratings and Yerevan Municipality signed an agreement last autumn and the agency provided the international financial rating for Yerevan for the first time in December of the same year.