According to Fitch Ratings, the peaceful resolution of Armenia’s political crisis via constitutional processes and the continued smooth functioning the central bank have minimized the impact of the crisis on the economy.

“The incoming government’s capacity to meet supporters’ expectations for change without a parliamentary majority will determine how long its honeymoon period lasts,” Fitch notes, adding that nevertheless, they expect broad economic policy continuity.

The financial sector did not see destabilizing pressure on bank liquidity or deposits, while international reserves remain at prudent levels, Fitch Ratings observes. A favorable external environment in terms of commodity prices, export demand and continued remittance growth reduces near-term risks for the economy.

Fitch believes that certain factors point to broad continuity in the commitment to preserve macroeconomic and financial stability.

“The Central Bank of Armenia has a high degree of independence, and the recently named Minister of Finance was the Deputy Finance Minister under a previous administration and is a career technocrat. Certain reform initiatives to lift growth prospects could overlap with initiatives of the previous government, which aimed for economic diversification and to improve the business environment,” Fitch writes.

Nevertheless, Fitch notes, domestic political uncertainty has not been fully dispelled, since the incoming administration faces significant challenges related to the Republican Party holding the majority in the parliament.

“It is not clear that Mr Pashinyan, a political outsider, can build and maintain a parliamentary majority and balance the need to work with entrenched economic interest groups while maintaining popular support by pursuing his broad aims of tackling corruption and a commitment to social justice,” said Fitch.

The agency does not anticipate near-term progress in resolving the Nagorno-Karabakh issue, and they still consider escalation to be a material risk.


“Armenia’s growth prospects and fiscal consolidation progress drove our decision to revise the Outlook on the country’s ‘B+’ sovereign rating to Positive last December, and will remain important factors in our ratings assessment,” concluded Fitch.