On August 25, 2023, the rating agency Standard and Poor's upgraded the long-term sovereign credit rating of the Republic of Armenia in both foreign currency and national currency, elevating it from 'B+' to 'BB-' with a 'stable' outlook.
The agency's assessment of a 'stable' outlook considers Armenia's steady economic growth prospects and enhanced fiscal balance, which are balanced against a somewhat weak external position and geopolitical risks.
The rating improvement reflects improvements in Armenia's GDP per capita and fiscal indicators. Due to the close geographical, economic and cultural ties with Russia, Armenia is considered one of the preferred destinations for Russian individuals and enterprises in Russia's current economic and political conditions. As a result, migrant and capital inflows have boosted Armenia's economic growth (real GDP in Armenia grew by 12.6% in 2022) and reduced fiscal and current account deficits. Financial inflows also led to a 22% appreciation of the dram against the US dollar by 2022, which contributed to the reduction of government debt in dollar terms.
It is worth noting that the agency views a significant reversal of financial and labor inflows from Russia to Armenia in the upcoming years as improbable. Barring extreme scenarios, the agency foresees a stable outlook for Armenia's economic growth in the forthcoming years, with a projected growth of 7.5% in 2023 and 4-5% in the years 2024 to 2026.
The enhancement of the rating is also attributed to Armenia's consistent access to external official financing and its sound macroeconomic policy framework. These factors have played a role in maintaining economic and financial stability over recent years, even in the face of various external shocks.
Furthermore, the agency anticipates that government debt will reach a stabilization point of approximately 42% of GDP by 2026. Additionally, Armenia's current account deficit is projected to expand to 2.0% of GDP in 2023, but is predicted to decrease between 2024 and 2026.
The full article of "Standard and Poor's" rating agency is here.