Moody’s Lowers Armenia’s Outlook To Negative On Weak Growth In Europ


Wall Street Journal

Nov 21 2011

Moody’s Investors Service lowered its outlook on Armenia’s
junk-territory sovereign ratings to negative from stable, pointing to
risks to the country’s growth given the anticipated economic slowdown
in Europe and Russia.

The ratings firm, which sees Armenia’s government foreign and local
currency issuer ratings two notches into junk territory at Ba2, noted
Europe and Russia account for 58% of Armenia’s export market. In
particular, Armenia’s reliance on exports to Russia poses risks to
the country’s external position.

Moody’s also said potentially lower commodity prices could further
impact the Armenian economy, as exports are concentrated in its mining
and metals industries. The outlook downgrade also reflects concerns
on the risk to Armenia’s shock-absorption capacity as it enters
another economically challenging period with weakened debt metrics
and a more vulnerable external position. The firm noted Armenia is
now faced with a large current account deficit and has seen its total
debt burden more than double in the last three years.

However, Moody’s noted the government is committed to fiscal
consolidation, with measures in a draft 2012 budget that are aimed at
reducing the general government deficit to 3.1% of GDP next year, as
well as efforts to improve the efficiency of tax collection. The impact
of such measures will remain unclear for some time and implementation
risks to the fiscal consolidation plan are significant, Moody’s added.

-By Nathalie Tadena, Dow Jones Newswires

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