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Research Announcement:

Moody's latest analysis of Armenia highlights growth potential and strengthening economic resiliency

09 April 2020


Singapore, April 09, 2020 --

  • Robust growth potential, despite likely stagnation this year, supports Armenia's economic strength
  • Solid economic and financial management can mitigate the impact of shocks

Moody's annual credit analysis of Armenia (Ba3 stable) highlights the country's robust GDP growth potential, with increasingly diverse economic drivers, as well as its track record of solid economic and financial management, which helps bolster its economic resiliency.

"Armenia's economy grew by 7.6% in 2019, up from 5.2% in 2018 and the highest level since 2007, on the back of strong household consumption and export growth driven by a recovery in mining and manufacturing," says Christian Fang, a Moody's Assistant Vice President and Analyst.

Ongoing reforms, such as the government's recently approved three-year anti-corruption strategy, as well as measures to raise public sector efficiency and raise transparency, have the potential to raise the quality of Armenia's institutions and governance, although tangible effects will take time to materialize.

"While we forecast real economic growth to stagnate this year, largely due to the impact of the coronavirus outbreak and lower oil prices affecting regional demand, there is still the potential for high growth rates of around 5%-6% for Armenia over the next few years," adds Fang.

Armenia's credit challenges stem from the government's moderate debt burden, its small and low-income economy which limits its shock-absorption capacity, and latent geopolitical tensions with its neighbour Azerbaijan (Ba2 stable) over the Nagorno-Karabakh territory.

The stable outlook indicates that risks to the rating are balanced. Upward rating pressure would arise if there are further reforms that raise Armenia's economic competitiveness, institutional credibility and effectiveness. A structural improvement in its external position, including through higher competitiveness and foreign direct investment, would also contribute to upward rating pressure.

On the other hand, downward rating pressure would emerge from a loss in reform momentum. This would likely transpire through weaker confidence in institutions and fiscal slippage, removing prospects that the government debt burden will decline over the medium term. An increase in external vulnerability risk, such as a sustained increase in current account deficits that result in declining foreign exchange reserve adequacy, would contribute to additional downward rating pressure.

In addition, continued high levels of dollarisation leave Armenia and its banking sector exposed to external shocks, although the central bank has introduced measures aimed at promoting de-dollarisation and reducing foreign exchange risks for banks.

Moody's credit analysis of Armenia looks at four factors: economic strength, institutions and governance strength, fiscal strength and susceptibility to event risk. Subscribers can access the full report "Government of Armenia – Ba3 stable: Annual credit analysis" at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1219108

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at [email protected] or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Christian Fang
AVP-Analyst
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

Gene Fang
Associate Managing Director
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

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JOURNALISTS : 852 3758 1350
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