YEREVAN, January 25. / ARKA /. Fitch Ratings has affirmed Armenia’s long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘B+’ with a Stable Outlook. Fitch has also affirmed the issue ratings on Armenia’s senior unsecured foreign currency bonds at ‘B+’. The Country Ceiling has been affirmed at ‘BB-‘ and the Short-term foreign currency IDR at ‘B’, Fitch said in a press release.
It said the ‘B+’ rating reflects the following factors: Armenia’s ratings are supported by its relatively high human development and governance indicators, favourable business climate and increasing economic resilience. However, they are weighed down by vulnerabilities to external shocks, high levels of external and foreign currency debt and political risks.
The Armenian economy is vulnerable to external shocks and has been adversely affected by the recession in Russia and drop in global commodity prices, which caused severe financial pressure in late 2014 and a sharp contraction in domestic demand in 2015. In 2014 Russia accounted for 80% of remittances (14% of GDP), 20% of exports and 44% of FDI; while copper accounted for 22% of exports, and other metals, minerals and gold for another 26%. Total remittances dropped by 33% YoY – the equivalent of 4.5% of GDP – in the first three quarters of 2015, while copper prices were down 28% YoY in December 2015.
However, Armenia has proved remarkably resilient to the magnitude of this shock, reflecting a strong trade performance, access to international financing and an effective policy response, under the aegis of an IMF program. Nevertheless, with oil prices, the Russian rouble and copper prices well below their average 2015 levels and still under downward pressure, it is too early to declare the external shock over, in Fitch’s view. -0-
