ArmInfo.On October 12, 2021, S&P Global Ratings assigned its 'B+' long- term foreign- and local-currency sovereign credit ratings to Armenia. At the same time, it assigned its 'B' short- term foreign- and local currency ratings. The outlook is positive.
It also assigned its 'BB-' transfer and convertibility assessment to Armenia. The latter exceeds the country's sovereign rating by one level, thanks to which private sector companies and financial institutions of Armenia, when rated by Standard & Poor's, can receive a rating higher than the country's sovereign rating (BB-) by one level. In the future, the sovereign rating from Standard & Poor's will allow, in cooperation with this agency, to develop a national rating scale for Armenia, taking into account the rich experience of Standard & Poor's in developing such scales. This can become a new incentive for increasing the level of transparency and business management in Armenia.
The positive outlook reflects also Armenia's prospects for a continued rapid economic expansion over the next two-to-three years. It also reflects the potential for faster-than-anticipated reduction in external leverage as well as stronger fiscal performance.. S&P says 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.
The entry of the largest international rating agency Standard & Poor's into Armenia means that the macroeconomic situation and risks in the country are improving, the flexibility of existing institutions is increasing, and another international structure is emerging that objectively evaluates the effectiveness of their policies. This will definitely help to gain the confidence of institutional investors and will have a positive impact on the profitability of Eurobonds placed in the future. Armenia's cooperation with Standard & Poor's will contribute to the development of the capital market in the country and accelerate the reform process in this direction, given that the sovereign rating was also obtained for private sector companies in order to ensure the possibility of assigning a rating to them and entering the local and international capital markets. Obtaining a sovereign rating Standard & Poor's will reduce the costs of obtaining a rating for companies in the private sector of Armenia, since in the absence of a sovereign rating, the price for obtaining a rating by private companies also includes an assessment of sovereign risk.
Armenia's sovereign rating "B +" is based on the assessments of Standard & Poor's experts that, despite significant external pressure, the country overcame the consequences of confrontation and military conflict without endangering the country's economic stability. Standard & Poors attributes this flexibility (opposition) of the economy, at least in part, to the concept of sound fiscal and monetary policies. With the funds accumulated as a result of sound fiscal policy, the authorities have provided significant assistance to the economy affected by the coronavirus pandemic, while maintaining financial stability in the country. In 2020, the Central Bank of Armenia also helped to counter serious and synchronized shocks with its flexible monetary policy.
To note, in early September 2021, Moody's confirmed Armenia's sovereign rating at "Ba3", leaving the forecast stable, expecting real GDP growth in 2021 by 4.5%. At the end of September this year Fitch Ratings has affirmed Armenia's long-term foreign currency issuer default rating (IDR) at 'B +' with a stable outlook, improving expectations for 2021 on GDP growth to 5.5% (from the previous 3.2%).
