Moody's Investors Service has raised its outlook on Armenia's junk-level ratings, touting the nation's deficit-reduction efforts and continued access to external funding sources on favorable terms.

The Wall Street Journal reports this.

The ratings firm's outlook on Armenia is now stable, and the nation's rating was affirmed at Ba2, which is two levels into junk.

Moody's touted the nation's commitment to fiscal consolidation, as reflected in the reduction of its deficit to 1.5% in 2012 from 7.5% in 2009. Moody's expects Armenia's fiscal deficit will remain low this year and in 2014, reflecting the costs of pension-reform implementation starting in 2014 and some resumption in capital expenditures.

Moody's did express some concern about the nation's ability to absorb external shocks, which has weakened amid its economic and financial exposure to Russia, which is experiencing an economic slowdown. Other concerns include natural gas and energy tariff increases that were implemented in July and large official loan repayments due the next two years.

Armenia could be assigned a positive outlook and an eventual upgrade if the structural reforms the government implemented propel the economy towards more balanced growth and with a significant reduction in the current account deficit. Negative rating pressure could occur if the economic slowdown in Russia is sustained or if adverse export minerals prices were to persist.