Fitch Affirms Armenia’s Credit Rating at “BB-” Highlighting Budget Deficit Growth and Economic Resilience

By Arshaluis Mgdesyan
Bm.ge
Yerevan — International credit rating agency Fitch Ratings has maintained Armenia’s long-term foreign currency credit rating at “BB-” with a stable outlook. The rating reflects income per capita and governance quality comparable to peer nations, stable growth prospects, and sound macroeconomic policies, despite a rise in fiscal deficit and debt burden.
According to the agency’s report published on January 24, Armenia’s budget deficit is projected to increase to 5.5% of GDP in 2025, up from 4.7% in 2024, significantly exceeding the “BB” median of 3%. The deficit growth is driven by expansionary fiscal policies, including costs associated with integrating approximately 65,000 refugees from Nagorno-Karabakh and increased military spending. Additional budgetary pressure will arise from the introduction of a universal healthcare program in 2026, which is expected to require annual expenditures equivalent to 1.3% of GDP.
Fitch forecasts that gross government debt will rise from 49.7% of GDP in 2024 to 55% by the end of 2026, aligning with the median for peer countries. A significant risk factor is the high share of foreign currency debt, which stood at 48.6% as of October 2024. However, these risks are partially mitigated by fixed interest rates on 85.7% of the debt and a high proportion (75%) of concessional loans from multilateral and bilateral creditors within Armenia’s external public debt structure.
The Armenian government plans to issue eurobonds in the first quarter of 2025 to refinance a previous issue worth $313 million maturing in March 2025. Additionally, it intends to secure further financing from external and domestic markets during 2025-2026 to meet budgetary needs and fund projects.