Collapsing Armenian Economy Triggers Fitch Downgrade

World Markets Research Centre
Global Insight
August 14, 2009

Collapsing Armenian Economy Triggers Fitch to Downgrade Sovereign Risk

BYLINE: Andrew Birch

On 13 August, Fitch Ratings downgraded its long-term foreign currency
Issuer Default Rating (IDR) rating for Armenia by one notch, taking
the rating from "BB" to "BB-". The outlook for the rating was set at
stable. Fitch affirmed its short-term rating for Armenia at "B". The
Fitch IDRs are the closest equivalent to IHS Global Insight’s
medium-term sovereign ratings, measuring credit risk at the sovereign
level. Despite the downward adjustment, Fitch’s rating remains two
notches above IHS Global Insight’s own rating of "B-" on the generic
scale (60 on our own scale). Fitch had last changed its Armenian
rating in July 2008, when it raised its rating from "BB-" to "BB". IHS
Global Insight last adjusted its overall rating for Armenia in March
2009 with a one-notch downgrade. In June 2009, IHS Global Insight
switched its ratings outlook from stable to negative.

Significance:The sharp economic contraction Armenia is suffering
triggered Fitch’s downward revision, as the severity of the downturn
substantively undermined the country’s credit fundamentals and
weakened the country’s medium-term outlook. Despite the downward
revision in the score, Fitch decided to keep its outlook at stable due
to strong support from the global financial community and thanks to
what it regards as appropriate policy responses from Armenian
authorities. The ratings agency also emphasised that Armenia’s
external and public indebtedness remained moderate, but that the
downgrade was more a response to the severity of the current economic
downturn. IHS Global Insight’s own view towards Armenia’s external
financing risks is less benign, reflected by our lower overall
sovereign risk score. Already wary of the impending economic downturn,
we have questioned where the country would be able to earn the
necessary financing to meet its external obligations, prompting our
own sovereign risk actions earlier in 2009. As with Fitch, however, an
even more pessimistic outlook has been averted due to strong backing
from the international financial community.

From: Emil Lazarian | Ararat NewsPress

Emil Lazarian

“I should like to see any power of the world destroy this race, this small tribe of unimportant people, whose wars have all been fought and lost, whose structures have crumbled, literature is unread, music is unheard, and prayers are no more answered. Go ahead, destroy Armenia . See if you can do it. Send them into the desert without bread or water. Burn their homes and churches. Then see if they will not laugh, sing and pray again. For when two of them meet anywhere in the world, see if they will not create a New Armenia.” - WS