Moody’s Ratings has affirmed Armenia’s Ba3 local and foreign currency long-term issuer ratings and maintained a stable outlook on Thursday.
The rating agency cited Armenia’s strong growth potential and solid governance as key factors supporting the decision. Moody’s expects improvements in Armenia’s long-term growth prospects, backed by productivity gains.
At the same time, Moody’s noted some weakening in the country’s fiscal strength due to moderate increases in government debt and reduced debt affordability. Geopolitical risk remains a significant concern, particularly tensions with Azerbaijan and changing security dynamics as Armenia’s relationship with Russia weakens.
Armenia’s near-term growth is expected to moderate to about 4.5-5% in 2025 and 2026, following above-trend growth during 2022-2024 that was driven by capital and labor inflows from Russia after the start of the Russia-Ukraine war.
Moody’s has raised its assessment of Armenia’s longer-term potential growth to 5% from 4.5%, supported by productivity gains from increased capital investment and improved human capital. Gross fixed capital formation grew at an average of about 21% annually over 2022-2024, compared to around 17% annually over 2017-2019.
The government deficit is expected to widen moderately in 2025, with the debt burden projected to increase from 48% of GDP in 2024 to about 52% in 2025, before stabilizing near 55% in 2026-2027.
Debt affordability is weakening as Armenia shifts its debt structure to reduce foreign exchange risks. The share of government debt in foreign currency declined to about 49% in 2024, from around 80% on average over 2017-2019. However, increased local currency borrowing has raised debt servicing costs to nearly 12% of government revenue in 2024.
Moody’s maintained Armenia’s local and foreign currency country ceilings at Baa2 and Ba1, respectively.
