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Central Bank: By 1 April 2016 overdue loans in Armenian banks grew by 22.5% over year

Vladimir Yevseyev: Updated Madrid Principles will not be implemented until the armed conflict is frozen

Mass Media: Bodyguards of Transport Minister detained under case over beating of businessman's son Sergey Abovyan

Stepanakert: The territories the Armenian side lost in April were mostly part of the buffer zone around Nagorno Karabakh

Federica Mogherini says next annual Eastern Partnership Foreign Ministers' meeting will be held in spring of 2017

Seyran Ohanyan has not met with Samvel Babayan

PACE Co-rapporteurs: Those responsible for atrocities in Karabakh conflict zone should be held fully accountable

Expenses of Armenian President's Administration up 10% in 2015

Prime minister: Supply of Russian weaponry to Armenia launched

Serzh Sargsyan and Seyran Ohanyan to discuss Karabakh problem in presidential residence tonight

Two-fold growth of loan restructuring applications registered in VTB Bank (Armenia)

Head of Armament Unit of Armenia's Armed Forces dismissed

Sharmazanov: Genocide of Christians in Ottoman Turkey, IS actions and Azerbaijani aggression have same handwriting

Ex-president of Armenia included in list of candidates for election to the new Board of Directors of JSFC Sistema

Mammadyarov: Status quo in Karabakh conflict may lead to severe military clashes

Trial over case of the cardboard tank that "crashed" into NSS building is still going on

Tatoul Manaseryan: Top power branches have a great number of caterpillars

Штормовой ветер срывал крыши домов и не на шутку напугал жителей Еревана

Armenian President attends ceremony of unveiling of Memorial to Marshal Hamazasp Babajanian

Bostanjyan calls for reducing all expenses having no crucial significance to state

OSCE PA Special Representative for South Caucasus arrives in Armenia

Seyran Ohanyan: Territories lost during April war were part of Artsakh

Armenian Defense Ministry responds to media reports about dismissal of commander of Mataghis regiment

Greek Defense Minister: Nagorno Karabakh conflict should be settled exclusively through peaceful means

Armenia and China discuss issue to boost cooperation

Baku trying to shift responsibility for April flare up in Karabakh onto Armenian side

Azerbaijani armed forces fire at Azerbaijani-Armenian border

Vice Speaker of Armenian Parliament: Due to parity in international statements on Karabakh problem, the peace process has been going round in a circle for nearly 20 years

Criminal case over embezzlement at ENA CJSC sent to court with a crime sheet

On May 21 as many as 112 museums of Armenia to open their doors to visitors from 6 pm till midnight

Average life expectancy for Armenia is 74.8 years, according to World Health Statistics: Monitoring Health for the SDGs

Samvel Farmanyan: Agramunt is not the politician to have any influence on Karabakh conflict settlement

Lydian International: financing package of Amulsar program is approved. Construction will launch in upcoming months

Serzh Sargsyan: April war has once again proved unity of our nation in its pursuit of liberty and protection of independence

Azerbaijan breached ceasefire agreement using various small arms

ACBA Leasing participates in "Week of Economic Capacities" as financial partner

Bako Sahakyan addressed to participants of 2nd forum of Armenian Political Parties launched in Stepanakert

Stepanakert rejects Baku's accusations of alleged use of prohibited shells with white phosphorus

EEU Prime Ministers agreed on establishing common market of petroleum and petroleum products and terms of adopting new common customs code

Armenian president presented to EEU prime ministers latest developments around Nagorno-Karabakh problem

Parliamentary opposition is skeptical about Armenian Prime Minister's intention to fight corruption

Loss of 800 hectares by Armenian side causes stormy debates at Armenian Parliament

Zhirayr Sefilyan says he is ready to assume authority for restoring Karabakh's territorial integrity by force

Dmitry Medvedev: My second visit to Armenia within a month speaks of the high level of the allied relations of Yerevan and Moscow

Beeline Communication Museum to join Museum Night event

Russian foreign ministry: Sargsyan and Putin will probably meet in Astana on May 31

Inhabitants of Garni and Goght demand from Hovik Abrahamyan and Ishkhan Zakaryan to cancel construction of irrigation systems designed for their own needs

PACE Chair: "All conflicts must be solved within the territorial integrity of the countries"

EEU Summit of Prime Ministers due to commence in Yerevan

Nagorno Karabakh disclaims Azerbaijan's allegations

Regional

Fitch affirms Armenia at 'BB-'; Outlook stable

  • by Karina Melikyan

  • Wednesday, August 6, 02:57

 Fitch Ratings has affirmed Armenia's Long- term foreign and local currency Issuer Default Ratings (IDRs) at 'BB-'. The Outlooks are Stable.  The issue ratings on Armenia's senior unsecured foreign and local currency bonds have also been affirmed at 'BB-'. The Country Ceiling has been affirmed at 'BB' and the Short-term foreign currency IDR at 'B'.

According to Fitch Ratings's website, the affirmation of Armenia's sovereign ratings reflects the following key factors:

The general government deficit fell to 1.7% of GDP in 2013, against initial projections of 2.8%.  This was mainly due to under-execution and delays in the implementation of public investment.  The government expects the deficit to rise to 2.4% of GDP in 2014, although further under- execution is possible. The increase in public sector wages, effective from 1 July 2014, will increase public spending by about 0.4% of GDP in 2014 and 2015, but has already been budgeted for and will be compensated by an increase in tax collection.

The general government debt level is expected to remain stable at around 43%-44% of GDP in 2014-15, and could fall in 2016 if GDP growth picks up. However, with about 85% of public debt foreign-currency denominated, Armenia's debt profile is vulnerable to exchange rate shocks.  The administration's willingness to prioritise domestic financing will lead to a gradual pick-up in domestic issuance, where appetite for state bonds will be boosted by insurance and pension reforms. 

GDP growth slowed in 1H14, partly because of the slowdown of the Russian economy, but is expected to pick-up slightly in the second half to average about 4.5% for the year, mainly as a result of base effects and a pick-up in investment. Although the increase in public sector wages may have a positive impact on private consumption, the recurring under-spending of public investment will continue to act as a drag on domestic demand. Inflation is expected to remain close to the Central Bank's target of 4%.

Because of its high dependence on Russia in terms of gas supplies, remittances and military support, Armenia remains particularly vulnerable to developments and policy changes in Russia.  Despite the slowdown in Russia, remittances have held up. Net remittances account for about 15% of GDP, of which more than 80% come from Russia. Similarly, nearly 20% of Armenian exports are destined for Russia. The Armenian government has announced its intention to finalise negotiations for its accession to the Eurasian Economic Union, but diplomatic hurdles remain. 

The current account deficit (CAD) shrank slightly in 2013, but is expected to remain high at nearly 10% of GDP in 2014, partly because of the weak performance of the Russian economy.  The Central Bank of Armenia is allowing some exchange rate flexibility, but international reserves fell in 1H14, following pressure on the exchange rate and the still large CAD. Reserves are likely to decline slightly over the coming years. 

Armenia has benefited from a series of IMF programmes and has agreed a further USD128m extended fund facility for 2014-17, which will act as a policy anchor. Armenia has so far fulfilled most of the performance criteria. Armenia will continue to enjoy support from major international financial institutions, which have been instrumental in most large infrastructure projects. 

Armenia's geopolitical environment is a constraint on the rating. The latent conflict with Azerbaijan over the disputed Nagorno-Karabakh region entails the risk of escalating into a full- scale conflict. 
The Stable Outlook reflects Fitch's assessment that upside and downside risks to the ratings are currently well balanced. Consequently, Fitch's sensitivity analysis does not currently anticipate developments with a high likelihood of leading to a rating change. The main factors that, individually or collectively, could lead to positive rating action are:

-Further improvement in the CAD and a stronger reserve position.
-A substantial decline in the debt-to-GDP ratio would improve creditworthiness, especially given the strategy of relying more on relatively costly domestic issuance and the vulnerability of debt dynamics to external shocks, via the exchange rate.
-An easing of the tensions with Azerbaijan or an improvement in relations with other neighbouring countries.
The main factors that, individually or collectively, could lead to negative rating action are:
- A bigger than expected impact on GDP growth from economic and political developments in Russia.
- A sharp rise in net external debt and a weakening of reserves.
- Material slippage in the performance of public finances leading to a significant rise in the debt/GDP ratio.
The key assumptions are as follows:

The ratings and Outlooks are sensitive to a number of assumptions:

Fitch assumes continuation of good relations with Russia, given the importance of this relationship both economically and diplomatically.
Fitch assumes that a sharp downswing in metals prices is avoided. Mining exports, especially copper, account for about half of Armenia's goods exports.
Fitch assumes that Armenia continues to enjoy broad social and political stability, and that there is no significant worsening in tensions with Azerbaijan surrounding Nagorno-Karabakh.
Fitch assumes that the global economy performs broadly in line with Fitch's Global Economic Outlook and that the US Federal Reserve exit from monetary stimulus is orderly, so that Armenia retains external market access despite higher international financial volatility.

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