YEREVAN, July 20. /ARКА/. Fitch Ratings analysts forecast a tightening of fiscal policy by the republic’s authorities in a new report on Armenia.
It notes that having recorded a budget deficit smaller than planned, Armenia softened fiscal policy in 2024 to ensure higher spending on defense and the rehabilitation of refugees from Nagorno-Karabakh.
“We expect these expenditures to decline after 2025, but fiscal rigidity will remain elevated due to the introduction of universal health insurance (with an expected increase in annual spending to 0.8% of GDP in the medium term) and other social spending,” the study says.
Fitch forecasts Armenia’s government deficit to widen to 5.4% of GDP in 2025, then decline to an average of 4.4% in 2026-2027.
“In line with the medium-term expenditure framework for 2026-2030, the authorities expect a significant fiscal tightening after 2027 to reduce the deficit to 1% of GDP by 2030. Fitch views this as optimistic, given the risks associated with the revenue targets,” the report says.
Fitch assumes that the Armenian authorities will comply with stricter fiscal rules that kick in when the gross public debt-to-GDP ratio exceeds 50%, including limiting primary current expenditure growth below the historical rate of nominal GDP growth. Capital expenditure will exceed the budget deficit in line with the fiscal rules, although Fitch expects capacity constraints to continue to limit project delivery.
The agency’s experts forecast the government debt/GDP ratio to increase to 51.3% in 2025 from 48% in 2024 due to the growing budget deficit and expected accumulation of deposits.
“We expect it to rise to 54.2% by 2027, which is in line with the current median for the ‘BB’ rating category. We expect greater reliance on external borrowing after several years of funding in the more expensive domestic market,” the report says.
It is indicated that in March 2025, Armenia issued Eurobonds in the amount of $750 million, exceeding the original issuance plan by 50%, in order to roll over the maturity of $313 million, replenish international reserves and reduce the need to attract domestic markets. Further external issues are unlikely in 2025-2026, Fitch believes.
In the current report published on July 18, Fitch Ratings affirmed Armenia’s Long-Term Foreign Currency Issuer Default Rating (IDR) at ‘BB-‘ with a Stable Outlook.
Armenian Economic Figures and Forecasts
Armenia’s economic growth is projected at 5.1% in the state budget for 2025. According to the Central Bank’s monetary policy report for the second quarter of this year, by the end of 2025, Armenia’s GDP growth is expected to be 5.1-4.6%, depending on the scenario (A-B), in 2026 – 4.9-4.4%, in 2027 – 4.7-5%.
The EDB forecasts Armenia’s GDP growth at 5.5% in 2025. The World Bank expects Armenia’s economy to grow by 4% in 2025, the IMF by 4.5%, the EBRD by 5%, and the ADB by 6%. According to the forecast of the Fitch Ratings agency, Armenia’s economy will grow by 4.9% in 2025, and the UN expects the Armenian economy to grow by 5.2% in 2025.
On public debt
According to Armstat, Armenia’s total public debt as of May 31, 2025, amounted to more than $13.73 billion, compared to $12.84 billion as of December 30, 2024. In the structure of the total debt, over $6.9 billion is external debt, and domestic debt amounted to more than $6.7 billion.
