ArmInfo. Private sector debt burden in Armenia will continue to grow. Rapid lending growth in 2024 and the projected strong expansion in 2025 (close to 5%) mean that Armenia's private sector debt to GDP ratio will likely recover to trend levels faster. The continued rapid accumulation of leverage, especially in the household sector with its steadily low savings rate, remains a long-term concern, according to S&P Global Ratings' report "Central Asia and Caucasus Banking Sector Outlook".
Specifically for Armenia, S&P Global analysts note that positively, growth in house prices in Yerevan has slowed to about 6% in 2024. S&P Global expects that the reduction in the mortgage tax credit size from 2025 will reduce lending growth further. Banking sector profitability will continue to normalize due to a stronger base effect, lower foreign currency revenues, and lower global interest rates. S&P Global expects that returns on assets of Armenian banks will decline to about 2.1% on average.
In general, across the region, S&P Global Ratings forecasts continued positive dynamics in the banking sector of Central Asia and the Caucasus countries in 2025. Banks in Armenia, Georgia, Azerbaijan, Kazakhstan and Uzbekistan are expected to remain resilient in 2025 (as in 2024). Low double-digit lending growth and stable asset quality will support profitability and capital levels.
