COVID-19 Impact Negatively Affects Armenia's Economy, Fitch Ratings

Fitch Ratings, an international ratings agency, has revised Armenia's long-term issuer default rating outlook from 'stable' to 'negative' while affirming the long-term issuer default rating at 'BB-'.

"The shock induced by the coronavirus has negatively affected Armenia's economy due to dependence on various commodities (most of which are exports), the Russian economy (remittances, trade, and foreign direct investments), and tourism, which is only partially offset by revenues from lower oil prices. This occurs against the backdrop of relatively high levels of Armenia's net external debt and a structural deficit in the current account that is only partially financed by capital inflows that do not create debt obligations," the Fitch Ratings report states.

In November 2019, Fitch Ratings had upgraded Armenia's long-term issuer default rating to 'B+' with a 'stable' outlook.

"Despite the reliable structure of macroeconomic policy and the continued inclination towards reforms, the economic shock has caused the public debt to acquire a significantly higher trajectory, and our forecasts for 2020 are linked to the negative risks arising from the COVID-19 outbreak," the report adds.

Analysts predict that the coronavirus-induced shock will slow GDP growth from 7.6% in 2019 to 0.5% in 2020. Fitch forecasts that GDP growth will partially recover in 2021 to 5.5% due to the restoration of external demand, an increase in investments, the recovery of private consumption, and job creation under moderate fiscal policy conditions.