Fitch Ratings has affirmed Armenia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook.

Armenia's 'BB-' rating reflects a robust macroeconomic policy framework and strong growth, which is supporting a rise in per capita income. Set against these strengths are the small size of the economy, fiscal deficits that will remain high relative to peers, weak external finances, high (albeit declining) financial sector dollarisation and geopolitical risks.

Real GDP growth was 5.2% yoy in 1Q25, driven by very strong performance in financial services and construction benefiting from government-led capex. However, manufacturing and mining have contracted since the start of the year. As one-off effects subside from large transit trade with Russia and the influx of Nagorno Karabakh refugees and other migrants, we expect growth to moderate to 5% in 2025 and 4.7% in 2026-27, from an average 8.9% in 2022-2024. 

The Amulsar gold mine, which is likely to start operations in 4Q25, will boost growth in the medium term.

The large volume of re-exports in 2024 (mainly of gold and precious metals from Russia to the United Arab Emirates) has abated, with exports and imports contracting by 60% and 50% year on year, respectively, in January-April 2025. Large capex and defence import needs will widen the trade deficit (albeit with a countering effect from Amulsar gold exports from 2026), while a normalisation of remittance inflows (following exceptional surges in 2022-23) will reduce the secondary income surplus. 

Dollarisation remains high (May 2025: 47.6% of deposits and 32% of loans) but has been declining from peaks of 72% and 66%, respectively, in 2014.

The government reported breaking up a 'coup' plot in June 2025, arresting senior members of the clergy and an influential businessman whose electricity distribution company was subsequently nationalised. In Fitch's view, the government's stability is not at risk, and the capacity of institutions has not been affected by recent developments. In March 2025, Azerbaijan and Armenia reported reaching a peace agreement, although the contents and timescale for signing a treaty are unclear. In Fitch's view, a return to military conflict is currently unlikely.