Fitch Ratings had considered Armenia and Georgia as among the sovereigns most vulnerable to the spillover from Russia’s invasion of Ukraine, but so far, the macro impact has been positive.

Fitch says this reflects the inflow of skilled nationals from Russia, Belarus and Ukraine and surge of money transfers.

The agency also notes that Russian money transfers into Georgia rose by 306% yoy in 1H22. In Armenia, money transfers through banks nearly doubled in the same period.

“The large secondary and primary income flows (as Russians relocate but continue to work for their Russia-based employers), combined with ongoing tourism recoveries and higher prices for export commodities, are narrowing current account deficits in both countries and strengthening FX reserves.

The inflows have prevented the rise in dollarisation that can occur in both at times of shocks, and have strengthened exchange rates. The latter is supportive for government debt given the high weight of FX-denominated debt in total debt,” Fitch Ratings noted.