Monday, December 18 2017 16:26
Karine Melikyan

Fitch improved Armenia`s rating indicators from sustainable to positive

Fitch improved Armenia`s rating indicators from sustainable to positive

ArmInfo. The international rating agency Fitch Ratings has affirmed Armenia's long-term issuer default rating (IDR) in foreign and local currency at "B +", improving the outlook on the rating from "Stable" to "Positive". The rating report was published by Fitch on December 15. 

According to the agency's analysts, after the shock of 2014-2015 the Armenian economy is being actively restored "due to structural improvement of exports, improvement of external demand, and also due to effective monetary policy.Key rating drivers were:  Medium The economy is experiencing a strong recovery following a large external shock in 2014-15, driven by a structural improvement in export performance, firmer external demand conditions and recovering remittances, and supported by a credible monetary policy framework.  Fitch has revised up its growth projection to 4.3% for 2017 from 3.4% previously, as GDP growth averaged 5.3% in 1Q-3Q. We expect growth to average 3.6% in 2018-2019 due to a still favourable environment for remittances and export growth. 

Armenia has started to implement strong fiscal consolidation. Fitch forecasts the general government budget deficit will shrink to 3.3% of GDP in 2017, from 5.5% in 2016, reflecting expenditure restraint and favourable revenue growth. Fitch expects the general government deficit to narrow further to 3% in 2018 and 2.7% in 2019, below the 'B' and 'BB' medians. 

Fitch's projections for the budget deficit and growth performance are consistent with stabilisation in government debt. We forecast debt to rise to 57.5% of GDP in 2017, slightly below the projected 58.6% 'B' median, peak in 2018 at 58.1% and gradually decline thereafter.  Armenia's government debt structure has a high level of concessional debt (66% of total debt), but 81% is foreign currency-denominated, exposing it to exchange rate volatility. 

Armenia has a moderate current account deficit, which Fitch forecasts at 3% of GDP in 2017 and to average 3.4% in 2018-2019. Domestic demand-driven import growth will be balanced by export receipts underpinned by stable commodity prices, diversification to new markets and stabilisation of the Russian economy benefitting export and remittances growth. A moderate current account deficit mitigates external vulnerability arising from commodity dependence and the small size of the economy.  It will also lead to the stabilisation, and then gradual reduction, of the country's high net external debt at 44.8% of GDP by end-2017 versus 20% for the 'B' median. 

Armenia's 'B+' IDRs also reflect the following key rating drivers:  Armenia is exposed to external shocks but has shown a capacity to absorb them, helped by a credible monetary policy framework. After exiting deflation in April, inflation remains low, and is expected to average 1% in 2017 before converging to the Central Bank of Armenia's (CBA) target of 4% in 2018-2019. The central bank has kept interest rates on hold since early 2017 and has stated its readiness to tighten policies if demand side pressures increase. 

The banking system remains stable with strengthened capitalisation (capital adequacy ratio (CAR) 19.1% in October). Deposit and loan dollarisation have declined but remained high at 57% and 62%, respectively. The banking system's FX position is balanced and regulations are in place to prevent foreign-currency lending to non-foreign-currency generators. Non- performing loans (up to 270 days overdue) equalled 6.7% in October, down from a peak of 10% in March 2016. 

International reserves are above USD2.1 billion (above four months of current external payments). Fitch estimates that Armenia's liquid assets as a share of short-term liabilities (at 125% in 2017) will remain below the 'B' category median. Exchange rate flexibility, reduced external imbalances and access to external financing reduce the risk of near-term balance- of- payment pressures. After completing its IMF EFF agreement this year, Fitch expects the authorities to seek continued engagement with the fund.  Armenia is in the process of modifying its fiscal rules. As government debt exceeded 50% of GDP in 2016, the previous fiscal rule required the government to target deficits lower than 3% of the previous three years' average GDP. This required an abrupt adjustment, which the government is unlikely to meet. New rules are likely to maintain the key 50% and 60% of GDP thresholds, while allowing a smoother fiscal adjustment path and favour capex over current expenditure. Armenia's fiscal credibility would also be strengthened by building a track record of meeting budgetary targets, as fiscal outturns in 2017 and 2018 will likely overshoot budgeted deficits, as in 2015 and 2016. 

Improving the country's medium-term growth prospects is likely to require further progress in reforming the investment climate and increasing domestic savings, as total investment is low at 18.4% of GDP. 

Armenia has structural strengths relative to peers in terms of higher income per capita and governance indicators. In April 2018, constitutional reforms will come into effect, with the Prime Minister becoming the Head of State and the President being elected indirectly by an electoral college/parliament. Fitch expects the general direction of economic policy to be unaffected. 

Fatalities and military incidents between Nagorno-Karabakh and Azerbaijan have picked up in intensity and frequency since late 2016. Meetings at the presidential and ministerial level between Armenia and Azerbaijan under the auspices of the OSCE Minsk Group in 2H17 have yet to make visible progress in stabilising the conflict, let alone resolving the Nagorno- Karabakh issue. Escalation is a material risk.

POST A COMMENT
Input digits     


News
Tigran Avinyan and Mark Pritchard discussed prospects for deepening  cooperation between Armenia and the UKTigran Avinyan and Mark Pritchard discussed prospects for deepening  cooperation between Armenia and the UK
PSRC introduced new regulations for natural gas consumersPSRC introduced new regulations for natural gas consumers
Study: Even with small volumes of the market, Armenia is able to  triple the volume of investmentsStudy: Even with small volumes of the market, Armenia is able to  triple the volume of investments
"Rosgosstrakh Armenia" continues to lead among insurance companies in  list of major taxpayers in Armenia
Government approved distribution among communities of subventions in  amount of 1.9 billion dramsGovernment approved distribution among communities of subventions in  amount of 1.9 billion drams
Minister: Positive expectations formed in Armenia`s business  communityMinister: Positive expectations formed in Armenia`s business  community
EAEU countries began to jointly produce elevatorsEAEU countries began to jointly produce elevators
Subregional Innovation Policy Outlook launched in ArmeniaSubregional Innovation Policy Outlook launched in Armenia
Expert: State Budget revenues over-fulfillment has nothing to do with  real GDP growth Expert: State Budget revenues over-fulfillment has nothing to do with  real GDP growth 
Pension fund Amundi-ACBA-Asset-Management celebrates 5 years of  activityPension fund Amundi-ACBA-Asset-Management celebrates 5 years of  activity
Vache Terteryan: Armenia is interested in localizing alternative  energy sourcesVache Terteryan: Armenia is interested in localizing alternative  energy sources
Possible disputes over the construction project of a new thermal unit  in Yerevan will be resolved in the International Chamber of CommercePossible disputes over the construction project of a new thermal unit  in Yerevan will be resolved in the International Chamber of Commerce
Chinese company interested in setting up basalt fiber manufacturing  enterprise in ArmeniaChinese company interested in setting up basalt fiber manufacturing  enterprise in Armenia
In 2019-2023 In 2019-2023 "ML MINING" LLC invests in development of production of  4 billion drams
Karen Yeghiazaryan has been appointed as Chairman of Management Board  of EvocabankKaren Yeghiazaryan has been appointed as Chairman of Management Board  of Evocabank
Babken Tunyan: The PABSEC platform is needed for communication; one  should not underestimate or overestimate it.Babken Tunyan: The PABSEC platform is needed for communication; one  should not underestimate or overestimate it.
"Haypost" and "Energoimpex" companies will remain in ownership of  Armenian state
At initiative of EC, a working meeting was held at Ministry of  Economy of RA regarding use of EU Taiex and Twining tools by public  sectorAt initiative of EC, a working meeting was held at Ministry of  Economy of RA regarding use of EU Taiex and Twining tools by public  sector
19th International Specialized Exhibition 19th International Specialized Exhibition "FOOD & DRINKS EXPO 2019"  will be held in Yerevan
Armenia approved a protocol on cooperation of EAEU countries with  Vietnam on  exchange of customs informationArmenia approved a protocol on cooperation of EAEU countries with  Vietnam on  exchange of customs information
7.4 billion drams out of an additional 62 billion dram in tax  revenues will be additionally allocated to the implementation of  programs in the field of road construction in Armenia7.4 billion drams out of an additional 62 billion dram in tax  revenues will be additionally allocated to the implementation of  programs in the field of road construction in Armenia
Park Group Company intends to implement in Yerevan a large investment  program worth 7.5 billion dramsPark Group Company intends to implement in Yerevan a large investment  program worth 7.5 billion drams
Armenian government to allocate 40 million drams to repair  Yerevan-Garni-Geghard roadArmenian government to allocate 40 million drams to repair  Yerevan-Garni-Geghard road
Jermuk Group Company invests AMD 363 million in production expansionJermuk Group Company invests AMD 363 million in production expansion
Minister assures: household appliances production plant in Armenia is  not a mythMinister assures: household appliances production plant in Armenia is  not a myth
Chinese business intends to invest $ 5 million in the production and  bottling of mineral waterChinese business intends to invest $ 5 million in the production and  bottling of mineral water
Four telecom operators in Armenia reduced tax payments to the state  treasury in I quarter of 2019 by 45.6% per annumFour telecom operators in Armenia reduced tax payments to the state  treasury in I quarter of 2019 by 45.6% per annum
EAEU is developing cooperation with the Pacific AllianceEAEU is developing cooperation with the Pacific Alliance
Gazprom Armenia continues to top the list of the largest taxpayersGazprom Armenia continues to top the list of the largest taxpayers
Armenian MFA: Polish companies are interested in the Armenian marketArmenian MFA: Polish companies are interested in the Armenian market


Exchange rates
24.05.2019
RUB7.440.02
USD480.030.05
EUR537.152.69
GBP609.352.85
CAD356.930.62
JPY43.770.16
CNY69.580.01
CHF478.552.90


Experts
Yulia Ustyugova: Armenia can get access to IMF “insurance line”Yulia Ustyugova: Armenia can get access to IMF “insurance line”
Armand Arton: The question whether citizenship should be granted in  return for investments is rather rhetoricalArmand Arton: The question whether citizenship should be granted in  return for investments is rather rhetorical
Former head of the Ministry of Finance: <Confrontation> with Lydian may cost much to ArmeniaFormer head of the Ministry of Finance: with Lydian may cost much to Armenia
Vardan Aramyan: It will be unreasonable if the government goes to revise the allowable national debt ceiling in GDPVardan Aramyan: It will be unreasonable if the government goes to revise the allowable national debt ceiling in GDP
HSBC Bank Armenia increases efficiency and focuses on digital servicesHSBC Bank Armenia increases efficiency and focuses on digital services
Bulgarian Minister: The level of Armenian-Bulgarian economic  cooperation is still unsatisfactoryBulgarian Minister: The level of Armenian-Bulgarian economic  cooperation is still unsatisfactory
Expert: Recruitment market in Armenia from the point of view of  supply and demand is sleepingExpert: Recruitment market in Armenia from the point of view of  supply and demand is sleeping
Expert: Despite the adequacy of Armenian banks` capitals, the  opportunities for its optimal use are severely limitedExpert: Despite the adequacy of Armenian banks` capitals, the  opportunities for its optimal use are severely limited
Association of Organic Agriculture is being created in ArmeniaAssociation of Organic Agriculture is being created in Armenia
Pailak Tadevosyan: Governments change in Armenia, but taxation  approaches do not changePailak Tadevosyan: Governments change in Armenia, but taxation  approaches do not change
Rouben Indjikian: Everyone should follow the established unified and fair rules of the gameRouben Indjikian: Everyone should follow the established unified and fair rules of the game
Mher Arakelyan:  Armenia`s payment business has great prospectsMher Arakelyan:  Armenia`s payment business has great prospects
Rating-Agentur Expert RA GmbH and AmRating issued an industry report  on Armenia`s banking systemRating-Agentur Expert RA GmbH and AmRating issued an industry report on Armenia`s banking system
Igor Nazaruk: Each planted sprout has the right to a successful prospect if it is cherished and taken care ofIgor Nazaruk: Each planted sprout has the right to a successful prospect if it is cherished and taken care of
Ara Khzmalyan: Armenia is comfortable to Russian touristAra Khzmalyan: Armenia is comfortable to Russian tourist
The Armenian delegation to the US followed the advice of President TrumpThe Armenian delegation to the US followed the advice of President Trump
Outflow of population and passivity of the Diaspora pushes property prices downOutflow of population and passivity of the Diaspora pushes property prices down
Finombudsman: Amendments to the Civil Code on the imposition of fines and penalties will reduce the number of outstanding loans and  non-creditworthy consumersFinombudsman: Amendments to the Civil Code on the imposition of fines and penalties will reduce the number of outstanding loans and non-creditworthy consumers
Vahan Shakaryan: If we promote Armenia, the promotion of economic sectors will not be a run with obstacles, but a light run for short distancesVahan Shakaryan: If we promote Armenia, the promotion of economic sectors will not be a run with obstacles, but a light run for short distances
Gagik Aghajanyan: There is no need to look for alternatives - it is necessary to work and develop actual   directionsGagik Aghajanyan: There is no need to look for alternatives - it is necessary to work and develop actual   directions

Search by date

Government Bonds

Issue volume

10 billion

Volume of T-bills for placement

200 million

Volume of submitted competitive applications

200 million

Volume of satisfied bids

200 million

Yield at cut-off price

 5.8314%

Maximum yield

 5.8314%

Мinimum yield

 5.8314%

Weighted average yield

 5.8314%

Number of participants

2

The maturity date of T-bills

03.02.2020

ArmEx

 

СПРОС (Покупка)

USD

Средневзв. Цена

482,00

ПРЕДЛОЖЕНИЕ (Продажа)

  USD

Средневзв. Цена

-

СДЕЛКИ

USD

Цена откр.

482,00

Цена закр.

482,00

Мин. Цена

482,00

Макс. Цена

482,00

Ср/взв. Цена

482,00

-0.16

Кол-во сделок

1

Объем (инвал.)

200 000

0бъем (драм)

96 400 000

Commented
Forecast: Electricity exports to the Middle East through Iran are a  key component of Armenia`s geo- economic strategyForecast: Electricity exports to the Middle East through Iran are a  key component of Armenia`s geo- economic strategy
ArmInfo IC: In Armenia,  CMTPL loss ratio increased up to 64.5% in Q1  2019ArmInfo IC: In Armenia,  CMTPL loss ratio increased up to 64.5% in Q1  2019
Overdue loans accelerate growth in banking system of ArmeniaOverdue loans accelerate growth in banking system of Armenia
RA Prime Minister: European Union is not ready to finance 100% of  development programs implementation in ArmeniaRA Prime Minister: European Union is not ready to finance 100% of  development programs implementation in Armenia
T.Avinyan: The Government is open for cooperation and encourages  active dialogue and interaction in all areas T.Avinyan: The Government is open for cooperation and encourages  active dialogue and interaction in all areas 
Agreement on construction of a new unit with combined gas cycle  signed in YerevanAgreement on construction of a new unit with combined gas cycle  signed in Yerevan
Veolia Jur: Regulatory charges are false and unfoundedVeolia Jur: Regulatory charges are false and unfounded
Armenian Prime Minister: We are gaining momentum for economic takeoffArmenian Prime Minister: We are gaining momentum for economic takeoff
Through the mobile banking application of Ardshinbank you can get a  loan in seconds.Through the mobile banking application of Ardshinbank you can get a  loan in seconds.
By the end of 2018, By the end of 2018, "Galburdjian Group" will launch the production of  sesame oil in Armenia
Expert: Armenia has a problem with effective use of water resources,  rather than small hydropower stationsExpert: Armenia has a problem with effective use of water resources,  rather than small hydropower stations
Investment forum Investment forum "Energy Week 2018" to be held in Armenia
Expert: It is necessary to start implementing the program for the  construction of a new nuclear unitExpert: It is necessary to start implementing the program for the  construction of a new nuclear unit
The Armenian government suggests raising the minimum pension by 60%The Armenian government suggests raising the minimum pension by 60%
The updated feasibility study of construction project of electricity transmission line Armenia- Georgia will be ready by the end of the year - the Ministry of EnergyThe updated feasibility study of construction project of electricity transmission line Armenia- Georgia will be ready by the end of the year - the Ministry of Energy
Eurasian Development Bank wishes to expand its activities in ArmeniaEurasian Development Bank wishes to expand its activities in Armenia
$ 100 million to be invested in repatriation project Build Armenia$ 100 million to be invested in repatriation project Build Armenia
FRV: Armenia`s growing desire to increase renewable energy sources is  a decisive factorFRV: Armenia`s growing desire to increase renewable energy sources is a decisive factor
Suren Papikyan: It`s safe now to do business in Armenia, assures  Armenian MinisterSuren Papikyan: It`s safe now to do business in Armenia, assures  Armenian Minister
Armenian state debt started reducing up to $6.7 bln to June 1 2018Armenian state debt started reducing up to $6.7 bln to June 1 2018
Minister: Implementation of program on liberalization of the electric  power complex of Armenia will be completed within the next two yearsMinister: Implementation of program on liberalization of the electric  power complex of Armenia will be completed within the next two years
Nikol Pashinyan: In a number of cases after paying fines and  penalties the borrowers will be allowed to take new loan Nikol Pashinyan: In a number of cases after paying fines and  penalties the borrowers will be allowed to take new loan 
German bank KFW urges Armenia to build power line in the direction to  GeorgiaGerman bank KFW urges Armenia to build power line in the direction to  Georgia
Anna Chobanyan-one of most likely candidates for new Head of General  Department of Civil Aviation Anna Chobanyan-one of most likely candidates for new Head of General  Department of Civil Aviation 
IFAD confirms its readiness to develop and implement new joint programs with Armenia`s Agriculture MinistryIFAD confirms its readiness to develop and implement new joint programs with Armenia`s Agriculture Ministry
Rosselkhoznadzor asks not politicize the issue of deliveries of tomatoes from Armenia to RussiaRosselkhoznadzor asks not politicize the issue of deliveries of tomatoes from Armenia to Russia