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 and higher income per capita than similarly-rated peers, but are constrained by Armenia's elevated public and external debt levels and tensions with some neighboring countries. It forecast real GDP growth at 5% in 2018, supported by private consumption and investment. Further, the agency noted that authorities are reviewing spending across all areas to identify inefficiencies, which has resulted in lower-than-budgeted spending. As such, it expected Armenia's fiscal deficit to narrow from 4.8% of GDP in 2017 to 2.2% of GDP in 2018 relative to the budgeted deficit of 2.7% of GDP. It also projected the general government debt level to decline from 58.9% of GDP at the end of 2017 to 56.2% of GDP by end-2020. However, it noted that the country's debt is exposed to exchange rate risks, given that 80.8% of total debt was denominated in foreign currency as at end-October 2018. In addition, Fitch expected the current account deficit to widen from 2.4% of GDP in 2017 to 5.1% of GDP in 2018 amid strong domestic demand, and to average 4.3% of GDP annually in the 2019-20 period, mainly due to sustained import growth. It anticipated that the deficit would be mostly financed by foreign direct investments and external borrowing of the public sector. In parallel, it forecast foreign currency reserves to cover about 3.5 months of current external payments by end-2018, which is in line with the median of 'B'-rated peers.
Source: Fitch Ratings