ArmInfo. On November 22, 2019, Fitch Ratings international rating agency increased Armenia's long-term issuer default ratings (IDRs) in foreign and national currencies by one scale - to the level of <BB-> with the forecast as Stable. This was reported by the press service of the Central Bank of Armenia.
In addition to the sovereign rating, Fitch also raised the upper limit of Armenia's ratings for long-term sovereign bonds in foreign and national currency also by a scale to "BB" (country ceiling), due to which Armenian private companies and financial institutions can get a rating (BB-) for bonds in foreign and national currency.
Fitch Ratings kept short-term IDRs of Armenia in foreign and national currency at <B>. The decision to upgrade Armenia's sovereign rating is based on Fitch's assessment that the institutions of Armenia contributed to a peaceful and smooth political transition and will be further strengthened through structural reforms. The Government has reaffirmed its commitment to pursuing sustainable macroeconomic policies and structural reforms, including the fight against corruption and monopolies, as well as strengthening institutions and governance.
Despite the presence of external instability, domestic political shocks and a period of rapid growth, Armenia maintained macroeconomic and financial stability, while inflation remained below the CBA target of 4%.
Fitch strongly relies on the government's commitment to keep external debt at the right level and lower the level of government debt beyond 50% of GDP by 2023. Fitch expects fiscal policy to be reasonable in accordance with the principles set forth in the fiscal rule.
Due to the growth of private consumption and the dynamics of private investment in construction, GDP growth was higher than predicted, and as a result, Fitch raised its forecast for Armenia's economic growth for 2019 to 6.5% (previous forecast 4.6%). The sustainability of the services and industry sectors, the recovery of the mining sector and the resumption of operation of the Teghout Copper-Molybdenum Combine, as well as an increase in government investment will continue to contribute to economic growth and ensure an average growth of 4.7% in 2020-2021.
Fitch predicts that the current account deficit will be reduced in 2019 due to increased export of minerals and dynamically developing tourism, agriculture and processing industry. The availability of external financing, increased international reserves and exchange rate flexibility have reduced the risk of international liquidity.
Access to external financing, the growth of international reserves and exchange rate flexibility mitigated the risk of international liquidity. The risks associated with external financing were mitigated thanks to the mechanisms of the proactive Stand-by loan agreement signed by Armenia with the IMF in May 2019. The issuance of a new tranche of Eurobonds by the government in September this year and the repurchase of 80% of the bonds of the first tranche scheduled for redemption next year decrease the short-term refinancing risks. The banking sector is well capitalized, and credit growth remains high due to growth in mortgage and consumer loans. The high growth in lending, partly reflects the decline in the informal economy, the growth of real incomes of the population and the increased risk appetite of banks in low-income conditions. The quality of banking sector assets is high.
The previous rating was assigned by Fitch to Armenia on May 24, 2019 (IDR <B +> "Positive" outlook), and on September 10, the company assigned the expected rating (EXP) of "B +" to the upcoming issue of Armenian sovereign currency bonds.