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.
