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

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

Armenia’s outlook reflects the country’s credible monetary policy framework, reduced external imbalances and stronger income per capita on the one hand and a rising public debt burden and tensions in relations with some neighboring countries on the other.


The agency anticipates that the start of a fiscal consolidation process will deliver a gradual decline in government debt and moderate current account deficits.

“Armenia maintained macroeconomic and financial stability despite heightened political uncertainty, reflecting the policy framework’s credibility and improved capacity to absorb economic and political shocks. Inflationary pressures remain under control (1.6% in 12 months as of May) and headline inflation is well below the central bank’s medium-term target,” the agency’s analysts think.

Touching upon the banking sector, Fitch noted that the system remains stable and did not experience destabilising liquidity pressures. Capitalisation levels and non-performing loans are adequate. Despite a gradual declining trend, financial dollarisation remains high at 54% for deposits and 60% for credits.
 
“The government intends to move ahead with reforms to the electoral code and call for snap elections in order to strengthen its parliamentary support for broader reform agenda. The new government faces the challenge of delivering results in line with heightened supporters’ expectations, maintain a united coalition and move ahead with reforms that challenge entrenched economic interest groups,” Fitch writes.

According to the agency, the new government has maintained a balanced geopolitical approach. In terms of the conflict with Azerbaijan regarding Nagorno-Karabakh, negotiations leading to a resolution are not expected in the near term.