Moody’s Raises Armenia Outlook On Deficit Reduction Efforts


The Wall Street Journal, NY
Aug 20 2013

By John Kell

Moody’s Investors Service has raised its outlook on Armenia’s
junk-level ratings, touting the nation’s deficit-reduction efforts
and continued access to external funding sources on favorable terms.

The ratings firm’s outlook on Armenia is now stable, and the nation’s
rating was affirmed at Ba2, which is two levels into junk.

Moody’s touted the nation’s commitment to fiscal consolidation, as
reflected in the reduction of its deficit to 1.5% in 2012 from 7.5%
in 2009. Moody’s expects Armenia’s fiscal deficit will remain low this
year and in 2014, reflecting the costs of pension-reform implementation
starting in 2014 and some resumption in capital expenditures.

Moody’s did express some concern about the nation’s ability to absorb
external shocks, which has weakened amid its economic and financial
exposure to Russia, which is experiencing an economic slowdown. Other
concerns include natural gas and energy tariff increases that were
implemented in July and large official loan repayments due the next
two years.

Armenia could be assigned a positive outlook and an eventual upgrade if
the structural reforms the government implemented propel the economy
towards more balanced growth and with a significant reduction in the
current account deficit. Negative rating pressure could occur if the
economic slowdown in Russia is sustained or if adverse export minerals
prices were to persist.

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