S&P Global Ratings: Private sector debt burden in Armenia will continue to grow

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.