Fitch in CIS and Czech Republic fixes high level of non-working loans  and their reflection in the official data

ArmInfo. International Ranking Fitch Ratings affirms long-term ratings for Armenia issuer default rate (IDR) in foreign currency at the level of with the  forecast "Stable". This is noted in the Fitch Ratings report "Slowing  Rating Dynamics in the CIS and Black Sea Region" (CIS and Black Sea  Region Rating Cycle Slowing), published on February 12 this year.

From neighboring countries of Armenia, the rating of Georgia was  increased from to , Azerbaijan - downgraded from to  . A country EAEC Russia's rating maintained at , Belarus -  with to , and from the CIS countries reduced Uzbekistan  rated rating of the Ukraine increased from - raised to Kazakhstan to .

"Most countries in the region have the Banking System Indicator   used by the agency, which reflects a . The level of non-performing loans is high and often  not fully reflected in official data," the Fitch Ratings report says. 

Analysts at Fitch Ratings note that government debt remains at an  average of 10 percentage points. higher than at the end of 2013 The  impact of devaluation, countercyclical fiscal policy, shocks in terms  of commodity income and support to the banking sector decreased, and  against this background, most sovereign issuers in the region  provided primary surpluses and reduced debt, and budget rules were  updated. However, currency risk is one of the key vulnerabilities.  Over 90% of the public debt of Uzbekistan, Belarus and Azerbaijan is  denominated in foreign currency, while for Armenia and Georgia this  figure is close to 80%. currency risk reduction depends on the  development of domestic capital markets in the national currency,  which also would support the de-dollarization.

According to them, ensuring higher growth while maintaining the  achievements in terms of macroeconomic stability is one of the most  important tasks in a matter of policy in Russia, Belarus and Ukraine.  Georgia has made the greatest progress in structural reforms, and its  indicators of governance are the strongest relative to comparable  countries in the region and countries with comparable ratings.  Political stability is affected by unresolved regional conflicts. The  high degree of centralized decision-making process in a number of  countries creates uncertainty in terms of the continuity of power,  although in recent years its transmission is ordered. Significant  social instability was not observed, but non-systemic politicians  used public discontent to come to power in Armenia and Ukraine, where  both new leaders expressed their intention to implement constructive  programs.

Fitch Ratings in this report also notes that the improvement in  economic policies has contributed to a recovery in the CIS countries  and the Black Sea region after a sharp drop in commodity prices and  the crisis in Ukraine in 2014. At the same time, Fitch Ratings  analysts expect that the recent positive rating dynamics are likely  to slow as these countries face deeper structural challenges.  "Our  restrained assumptions on commodity prices do not imply a significant  strengthening of balances for exporters of raw materials. Thus, with  regard to Kazakhstan, Azerbaijan and Uzbekistan, we will focus on  whether they will be able to increase the predictability and  effectiveness of policies. Energy importers have reduced external  imbalances for account for adjusting the exchange rate and improving  terms of trade.  Nonetheless, external liquidity and provisioning  coverage remain relatively low. Hur vulnerability could have a  positive impact on the ratings of Armenia, Belarus, Georgia and  Ukraine ", - the report says.  Analysts at Fitch Ratings believe that  the improvement in the current policy reinforces a generally stable  outlook on sovereign ratings in the region, but if the situation with  the remaining creditworthiness is not resolved, this will be an  obstacle to further improvement in ratings and may lead to pressure  on creditworthiness.

It should be noted that on November 22, 2019 Fitch Ratings raised the  long-term issuer default ratings (IDRs) in foreign and national  currencies for one scale - to the level of with the forecast  "Stable". In addition to the sovereign rating, Fitch also raised the  upper limit of Armenia's ratings on long-term sovereign bonds in  foreign and national currency also by a scale to the level of "BB"  (country ceiling). At the same time, Fitch Ratings kept Armenia's  short-term IDRs in foreign and national currencies at .  The  previous rating was assigned by Fitch to Armenia on May 24, 2019 (IDR  "Positive" outlook), and on September 10, the company assigned  the expected rating (EXP) of "B +" to the upcoming issue of sovereign  currency bonds of Armenia.