Fitch Ratings affirmed Armenia's long-term foreign- and local-currency Issuer Default Ratings (IDRs) at 'B+' with a 'positive' outlook. It indicated that the ratings are supported by the country's credible monetary policy framework, reduced external imbalances and higher income per capita than similarly-rated peers. But it said that the ratings are constrained by the country's wide fiscal deficits, rising public debt level, high external debt level and tensions with neighboring countries. It forecast real GDP growth at 4.7% in 2018 and 4% in 2019, supported by strong external and domestic demand, a recovery in consumption and investment, higher commodity prices, and sustained growth in remittance inflows and tourism receipts. Also, it pointed out that the fiscal deficit narrowed from 5.5% of GDP in 2016 to 4.8% of GDP in 2017, but underperformed the government's target deficit of 2.7% of GDP due to the disbursement and execution of a Russian defense loan of $170m, equivalent to 1.5% of GDP. Still, it projected the deficit to narrow to 3.5% of GDP in 2018 and 3% in 2019 in the absence of further unanticipated external loan disbursements. As such, it expected the public debt level to decrease from 59% of GDP at the end of 2017 to 58.4% of GDP at end-2018. It noted that the public debt level is exposed to exchange rate volatility, given that 81% of the public debt is denominated in foreign currency. In parallel, Fitch forecast the current account deficit to slightly widen from 3.5% of GDP in 2017 to 3.8% of GDP in 2018, as the growth in export receipts and remittance inflows would be offset by strong import demand and rising energy prices. It said that the country's exchange rate flexibility, reduced external imbalances and access to external financing would reduce risks to the balance of payments in the near term.
Source: Fitch Ratings