Fitch Ratings has affirmed Armenia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a Positive Outlook.

At the same time, Fitch has affirmed Armenia’s Short-Term Foreign-Currency and Local-Currency IDR at ‘B’ and the Country Ceiling at ‘BB-’.

According to the agency, Armenia’s ratings “balance a credible macro policy mix and stronger income per capita and governance indicators relative to peers against high public and external debt and tense relations with some neighboring countries”.

On the other hand, the agency has noted that the Positive Outlook “reflects institutions that have underpinned macroeconomic and financial stability through a period of significant political change, a stronger growth outlook relative to peers, and a commitment to a medium-term programme of government debt reduction”.

“External vulnerabilities have re-emerged following a sharp widening of the current account deficit in 2018, although this may partly reflect statistical issues,” the agency said.

It forecasts the general government deficit to widen to 2.3% of GDP in 2019. A planned tax reform package will cause revenue losses, which might be offset by strong tax administration measures, Fitch Ratings said.

“The government over-performed its 2018 deficit target of 2.7% of GDP, recording a deficit of 1.6%, as spending reviews by the new government led to an under-execution of capex, while robust economic growth and improved tax administration boosted revenues,” it added.

Fitch forecasts that the gross general government debt (GGGD)/GDP will decrease to 55.5% of GDP in 2019 and 54.5% in 2020.

“We forecast real GDP growth to decelerate in 2019 to 4.6% and 4.5% in 2020. Lower remittances will likely lead to lower private consumption. However, potential resumption of the construction of the foreign-owned Amulsar gold mine provides upside risks to our economic forecast,” said Fitch Ratings.