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- Yerevan
Moody’s on the Armenian economy
The international rating agency Moody’s confirmed the sovereign rating of Armenia “Ba3”, changing the outlook from “negative” to “stable”. They note that “the economic and fiscal indicators of Armenia have improved significantly, the risks are balanced.”
According to economist Atom Margaryan, the rating assigned to Armenia really reflects the state of affairs, and this is a positive impulse for investors. At the same time, he believes that in the event of the launch of investment projects, it will be necessary to balance both financial and military-political risks. Reminds the example of the Armenian-American metallurgical plant in Yeraskh, on the border between Armenia and Azerbaijan, which continues to be built “under the shelling of the Azerbaijanis.”
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The rating agency came to this conclusion on the basis of data on the improvement of economic and fiscal indicators in Armenia over the past year. Moody’s expects this growth to continue this year.
The Ministry of Finance reports that the agency predicts further growth of the Armenian economy:
“Stable economic growth will continue in Armenia in the next few years. In particular, in 2023, the economy is projected to grow by about 7%, in 2024 – 5-6%.”
It is also noted that the country’s fiscal performance will continue to stabilize, and the debt burden will be “at a lower level than in the period before the coronavirus pandemic.”
For the first time in the history of Armenia, the volume of foreign direct investment amounted to about one billion dollars.
Economist Atom Margaryan says that Moody’s estimates correspond to reality and the developments that have taken place in the Armenian economy in recent years:
“Factors that have contributed to economic growth are associated with massive investment and capital inflows. Of course, the fiscal situation has also improved, both in terms of equalizing revenues and expenditures.”
The expert emphasizes that there are positive trends both in the field of macroeconomics and foreign economic relations. According to him, the “impressive strengthening of the local currency, the dram” influenced the structure and content of exports, and the “re-export factor” also played a big role. Taking all this into account, the economist considers the 7% growth of the economy predicted for 2023 to be quite realistic.
He characterized the current trends as positive, adding that the processes taking place in the financial sector contributed to the reduction of the state’s debt burden. At the same time, he warned that against the backdrop of an increase in reserves and a structural change in public debt, there are “alarming circumstances”.
“In the context of budget reforms and the abuse of domestic sources to finance the deficit, the private sector is shrinking. Capital is directed to the treasury bond market, where investments are attractive and reliable, while there are still problems in the real sector of the economy,” Atom Margaryan explained.