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Fitch upgrades Armenia’s credit ratings with stable outlook

US-based international credit rating agency Fitch Ratings has upgraded Armenia’s long-term foreign currency issuer default rating to BB- from B+ with a stable outlook on the country’s economy.

“In spite of external volatility, domestic political shocks, and a period of rapid growth, Armenia has preserved macroeconomic and financial stability with inflation (3.8 per cent in October) remaining below the Central Bank of Armenia (CBA) target of 4 per cent,” the ratings agency said in a statement, adding that the country’s government “has demonstrated its commitment towards a stable macroeconomic policy agenda and to the implementation of structural reforms, including the fight against corruption and monopolies and enhanced institutions and governance.”

A “robust credit-led private consumption and dynamic private investment in the construction sector” led the ratings agency to revise its GDP growth projection for Armenia to 6.5 per cent from a previous 4.6 per cent which is expected to be followed by a deceleration to 4.7 per cent in 2020 and 2021.

Fitch expects inflation to pick up to 2.5 per cent in 2020 and 3.3 per cent in 2021, from the projected 1.7 per cent this year, which is supported by “a more expansionary monetary policy” while Armenia’s public debt is projected to decrease to 51.2 per cent of the GDP in 2019 and 48.4 per cent in 2021, from a peak of 58.9 per cent in 2017. This decline is “supported by a prudent fiscal policy and low effective interest rates.”

External vulnerabilities remain a key rating weakness for Armenia, with a structurally large current account deficit and a low level of foreign direct investment, projected at two per cent of the GDP for 2019.