Yerevan/Mediamax/. Fitch Ratings has affirmed Armenia's Long-term foreign- and local currency Issuer Default Ratings (IDR) at 'BB-' respectively. The outlook on the long-term IDRs is stable.

Mediamax was informed in Fitch Ratings press service that the agency affirmed the Short-term local currency IDR at 'B' and Country Ceiling at “BB'.

"Armenia's economy is recovering after recording one of the sharpest contractions in the world in 2009. Real GDP has turned positive and pressure on foreign currency reserves and the exchange rate have eased," said David Heslam, Director in Fitch's Sovereign team.

According to him, the extended IMF programme underpins confidence in continued policy discipline and official international financing is helping to ease the necessary economic adjustment.

"Nevertheless, Armenia has large twin current account and budget deficits and policy loosening in the face of the global economic shock, combined with the scale of the 2009 economic contraction, have left a costly negative legacy on the sovereign credit profile in terms of higher government and gross external debt. These will take time to correct," added Mr Heslam.

Fitch is forecasting Armenian GDP growth of 5% following the results of 2010. A stronger economic growth backdrop and good revenue performance so far in 2010 increases confidence that the government will reduce the deficit this year to its target of 4.9% of GDP.

Fitch forecasts Armenia's gross government debt/GDP ratio to rise from its pre-crisis level of 14.9% at end-2008 to a peak of 43% in 2012, falling gradually thereafter.

“Armenia's sovereign ratings are supported by a strong economic policy framework by 'BB' peer standards, light public and external debt servicing burden and relatively good business environment, while the large twin fiscal and current account deficits, low and volatile government revenue base and small, narrowly-based and highly "dollarized" economy weigh on the ratings”, the rating agency notes.