YEREVAN

S&P Global Ratings assigned its ‘B+’ long-term foreign- and local-currency sovereign credit ratings to Armenia and ‘B’ short-term foreign- and local currency ratings. The outlook is positive.

The agency has also assigned its ‘BB-‘ transfer and convertibility assessment to Armenia.

S&P said that the Armenian economy was recovering and that it expected the country’s gross domestic product (GDP) to exceed 2019 levels by next year, and for growth to settle at close to 4 percent a year over the medium term.

According to S&P, with per capita GDP estimated at around $4,600 this year, absolute levels of income remain modest, while fiscal and external leverage are comparably high.

“The positive outlook reflects the potential that implementation of the government’s five-year programme will generate faster growth, external deleveraging, and further improvements in the country’s monetary policy framework,” S&P said in a report.

It added that the positive outlook also reflected “Armenia’s prospects for a continued rapid economic expansion over the next two to three years, the potential for faster-than-anticipated reduction in external leverage as well as stronger fiscal performance, beyond our expectations.”

S&P said it could raise the ratings on Armenia over the next 12 months if it sustained its strong economic performance with no major external headwinds or pandemic-related challenges clouding the medium-term growth prospects alongside sustained structural reform momentum.

An upgrade could also follow a larger-than-expected reduction in external debt.

S&P said it could revise the outlook to stable if GDP growth fails to pick up, contrary to the agency’s expectations, or if the external deleveraging trend reverses.

S&P said its ratings on Armenia were constrained by evolving institutional settings, low-income levels, high external indebtedness, and sizeable external financing needs.

“The ratings are supported by Armenia’s positive growth outlook, its fiscal consolidation plans, the availability of external official funding, and a prudent policy framework that has helped preserve economic stability despite severe and synchronised shocks in 2020,” the agency said.

In March, Fitch Ratings has affirmed Armenia’s long-term foreign-currency Issuer Default Rating (IDR) at ‘B+’ with a Stable outlook.

In August, Moody’s Investors Service affirmed Armenia’s Ba3 local and foreign currency long-term issuer ratings and foreign currency senior unsecured rating. The outlook remains stable.