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Sharmazanov: In today's interview Gagik Tsarukyan repeated its speech at Oct 24 rally but in an easily defined form

Nikolay Ryzhkov: Nagorno-Karabakh may join EAEU after its final status is determined

Prices for meat products may grow in Armenia

Ardshininvestbank reopens its new and reconstructed Shengavit Branch

Prosperous Armenia Party has not yet determined its position regarding Armenia's joining Eurasian Economic Union

Elmar Mammadyarov: Azerbaijan is ready to start the work on the project of a great peace treaty

Azerbaijani diversionists blame their liquidated comrade Hasan Hasanov for murdering Karabakh civilian

Armen Gevorgyan appointed Head of IDeA Foundation

ArmSwissbank and Management Mix intend to set up an investment management company

Winners of "Open Game 2014" Championship of Computer and Mobile Games already announced

Ameriabank confidently strengthens its leading positions

VivaCell-MTS provides a diesel generator set to Ministry of Emergency Situations for uninterrupted operation of backup server

New garbage dump to be opened in Yerevan

The UK would not like Simferopol-Yerevan flights to be launched

Beeline and Edward Mirzoyan String Quartet announce extension of their cooperation.

Air Armenia suspends passenger operations

Head of Armenian CEC unaware of opposition's plans to organize snap parliamentary elections

Armenia's deputy finance minister does not rule out growth of prices after Armenia's joining Eurasian Economic Union

British and German Ambassadors hope Ankara will make a step towards normalization of relations with Armenia in future

David Harutyunyan: Bi polar political system is being formed in Armenia

Ukraine's Ambassador refutes reports on opening of Yerevan-Simferopol flight

Washington not commenting on Azerbaijani saboteurs' trial

Newspaper: Armenian National Congress and Heritage Party fail to persuade Leader of Prosperous Armenia Party to launch sit-down strike in Liberty Square

Edward Nalbandian says Sargsyan-Aliyev meeting in Paris was a step towards rapprochement of the two countries' positions

Analyst: There are no idiots in Russia today

Handset, tablet and internet modem repair and service center is now available in the Orange Flagship store

"Beeline Child Development Centers" opened in Ararat region of Armenia

Monitoring Report on the Agreement between EU and Armenia on Facilitation of Issuance of Visas presented in Yerevan

VivaCell-MTS implements the 6th draw "365"

Eduard Sharmazanov: It is impossible to speak of compromises if Baku rattles the sabre

Ivan Kukhta: 70% of citizens of Ukraine in Armenia supported the course of the president and government of Ukraine

Special Investigation Service of Armenia initiates criminal case regarding incident that occurred to ASALA veteran

Results of Sargsyan-Aliyev Paris meeting summed up

VTB Bank (Armenia) - the leader by the credit investments according to the results of the 3Q 2014

Cemal Pasa's grandson advocates eliminating nationalism and taboo on the term "genocide" in Turkey

Daughter of Yunus appeals to the French president

Plane flying from Tehran to Yerevan makes an emergency landing

Azeri raider Shahbaz Guliyev gives details of murder of Armenian youth

The Chkalov village community has started the construction of the water supply network

Ashot Manucharyan: It is very much dangerous and senseless to lead Russia to war readiness

Armenian-French high-level talks in Paris are over

Sargsyan-Aliyev meeting kicks off in Paris

Speaker of Armenian Parliament: Executors of Oct 27 1999 terrorist act in Armenian Parliament are known but their guiders are not

Closure and conservation of illegal artesian wells in Ararat Valley will help saving over 360 million cu m of water annually

Turkey is seeking to include Armenian town of Ani into UNESCO World Heritage List

Haaretz: The sale of weapons to Azerbaijani government is like the sale of weapons to Nazi Germany during World War II

Schedule of meeting of Armenian, French and Azerbaijani presidents in Paris made public

Trial of Azerbaijani diversionists commences in Stepanakert

Exclusive

Ashot Manucharyan: It is very much dangerous and senseless to lead Russia to war readiness

Tigran Khzmalyan: Armenia has linked its Noah's Arc to Russia's sinking Titanik that is still selling tickets

Alexander Iskandaryan: Peace and war are the two things Russia does not need in the South Caucasus

Ariel Cohen: Putin may be compensating for reputational damage to Russia in the conflict in Ukraine by trying to resolve the Karabakh conflict

Hovhannes Igityan: Serzh Sargsyan’s geopolitical choice is an obstacle for investments in Armenia’s economy

Andrey Areshev: Russia wants to see Armenia as its strong and dynamically developing ally in the South Caucasus

Vahan Vardapetyan: October 10 will become the day of culmination of consolidation of the society around the Armenian centrist parties

Manvel Sargsyan: The myth of Russia's importance for Armenia is based on the formula "We will defend you"

Thomas De Waal: The society and power in Armenia and Azerbaijan are strongly linked by a vicious circle

Ukraine’s Ambassador to Armenia: The next phase of development of the Ukraine-EU relations may be only Ukraine's EU membership

Hakob Andreasyan: Current reforms are as important as those conducted in privatization period

Hakob Andreasyan: We try to ring-fence farmers from untypical risks

Giorgi Gvimradze: Russia's fate hangs in the balance in Ukraine

In NK peace, it is necessary to pay attention to other processes in Scotland and Catalonia

Armenia’s ex Defense Minister: We have enough options to advance to the north of Azerbaijan

Fitch affirms Armenia at 'BB-'; Outlook stable

  • by Karina Melikyan

  • Tuesday, August 5, 21:57

 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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