Fitch Ratings has revised the Outlook on Armenia's Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to Positive from Stable and affirmed the IDR at 'BB-'. 

The Outlook revision reflects Armenia's higher international reserves and continued solid growth that will support fiscal consolidation consistent with debt stabilisation over the medium term. 

The US-sponsored peace framework with Azerbaijan significantly reduces near-term military escalation risks, but lingering uncertainty remains regarding its successful conclusion due to the proximity of parliamentary elections and potential constitutional reform referendum.

Armenia and Azerbaijan signed a joint declaration that aims to reach a peace agreement, which significantly reduces near-term military escalation risks. In Fitch's view, the finalisation remains subject to uncertainties as it is conditional on Armenia amending its constitution to remove references to Nagorno-Karabakh, which requires a popular referendum that will potentially take place after the June parliamentary elections. Trade with and through Azerbaijan has begun to open up. 

Fitch estimates that the 2025 general government (GG) deficit was 5.0% of GDP, lower than the budgeted 5.5% but still above the 'BB' median (3.0%), reflecting lower capex and interest payments. 

We expect the government to meet its 4.5% deficit target in 2026, but from 2027 we expect deficits above the authorities' 3.5% medium-term target.

Fitch estimates real GDP growth of 5.5% in 2025 (moderating from an average of 8.9% over 2022-2024 due to Russian capital and migration inflows), driven by strong activity in the construction, IT and financial services sectors. Growth should remain above 5.0% in 2026-2027, supported by resilient services and the opening of the Amulsar gold mine, which the IMF estimates will contribute 1.25pp to GDP growth over 2026-2027. Additional upside to the medium-term growth forecast could emerge from sustained implementation of the peace agreement with Azerbaijan and the reopening of the border with Turkiye.

International reserves rose by 38% to USD5.5 billion in 2025. However, Fitch expects reserve coverage will gradually decline in coming years due to projected growth in imports.

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 are high relative to peers, weak external finances, high (albeit declining) financial sector dollarisation and a fragile geopolitical environment, although peace negotiations have shown some progress.