S&P Global Ratings maintains Armenia`s ratings at "BB-/B",  forecasting 6.2% GDP growth in 2024

ArmInfo. On Aug. 23, 2024, S&P Global Ratings affirmed its 'BB-/B' long- and short-term foreign and  local currency sovereign credit ratings on Armenia. The outlook on the long-term ratings is stable.

This is noted in a statement by S&P Global Ratings, which, in addition to justifying the maintenance of  the rating at the previous level, also cites a projected slowdown in  Armenia's GDP growth in 2024-2025 from 6.2% to 5.2%.  The "stable"  outlook on Armenia's sovereign rating reflects, on the one hand, good  economic growth prospects and a moderate level of public debt, and on  the other, the existing vulnerability of the balance of payments and  elevated geopolitical risks.

Thus, according to the forecast of S&P Global Ratings, although  Armenia's GDP growth rate in real terms will slow down this year, it  will nevertheless still be high compared to the average annual rate  of 10.7% in 2022-2023. " We forecast Armenia's real GDP growth will  decelerate to a still high 6.2% in 2024 from the 11% annual average  in 2022-2023 as Russian migrant and capital inflows moderate," the  S&P report noted.  S&P Global Ratings, drawing attention to the new  medium-term budget plan approved by the Armenian government, which  provides for increased spending on defense, infrastructure and  healthcare, predicts a larger budget deficit of 4.2% of GDP in  2024-2027. "The government has adopted a new medium-term fiscal  framework that increases spending on defense, infrastructure, and  health care, which leads us to project wider fiscal deficits  averaging 4.2% of GDP from 2024-2027."

S&P expects security and geopolitical risks to persist due to  tensions with Azerbaijan, despite the latter's transfer of control  over the previously disputed territories of Nagorno-Karabakh. In  addition, growing tensions between Armenia and Russia could  significantly increase uncertainty for Armenia, given its heavy  dependence on Russia for trade, energy and financial flows from that  country." We expect security and geopolitical risks to persist due  the unresolved tension with Azerbaijan as well as deteriorating  relations with Russia, which could disrupt the significant economic  ties between the two nations".

It should be noted that the June forecasts of the IMF, WB and the  Central Bank of Armenia (CBA) predict a slowdown in Armenia's GDP  growth in 2024 and 2025. Specifically, the IMF expects Armenia's GDP  growth to decrease to 6% in 2024 and 5.3% in 2025. The CBA also  predicts a slowdown in GDP growth to 6.8-6.1% in 2024 and 6.1-3.8% in  2025 The WB expects Armenia's GDP growth to slow down to 5.5% in 2024  and to 4.9% in 2025.  According to actual statistics, Armenia's GDP,  which accelerated in growth in 2021-2022 from 5.8% to a double- digit  12.6%, slowed down to 8.3% in 2023, reaching 9.5 trillion drams  ($24.2 billion) in absolute terms.