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Armenia growing by 10% per year

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  • Armenia growing by 10% per year

    Armenia growing by 10% per year

    Financial Mirror, Cyprus
    July 25, 2006

    www.financialmirror.com

    Assigned a Ba2 rating

    Armenia has been experiencing real GDP growth rates of around 10% per
    annum or above since 2001, while inflationary pressure have remained
    subdued due to the appreciation of the dram (the local currency)
    and to a cautious monetary and fiscal policy stance.

    This led Moody's Investors Service to assign on Monday a Ba2 foreign
    and domestic currency ratings to the government of Armenia.

    The rating was given in light of the progress made by the country since
    1995, the year that marked the end of the seven-year contraction that
    followed the collapse of the Soviet Union.

    "We believe that, over the medium term, there is sufficient scope
    for further GDP growth such that it will help alleviate poverty and
    reduce unemployment, both of which remain high in Armenia," said
    Moody's Vice President Sara Bertin.

    "Moreover, the rating is supported by the limited level and favorable
    maturity structure of Armenia's foreign-currency denominated debt."

    She said that with a 23% debt-to GDP ratio at the end of 2005, the
    country compares well to its peers. Ninety percent of the debt is
    owed to multilateral lenders on concessional terms representing a
    long maturity and associated minimal debt-servicing cost.

    "We have also taken note of the high level of dollarzation and the

    country's lack of financial depth," said Bertin.

    Capped by geopolitical factors

    Moody's rating is capped by geopolical factors, said the analyst.
    Though the worst fighting over the territory of Nagorno Karabakh
    ended in 1993, the conflict remains stalemated, with the leaders of
    the Armenian-inhabited enclave claiming an independent status that
    no other state has recognized.

    "Moody's assigns a very low probability that the conflict between
    Azeris and Armenians might resume over the short to medium term,"
    said Bertin. "As long as a credible and sustainable solution has yet
    to be found, uncertainties remain over the countries of the South
    Caucasus. Due to their borders with Iran, countries such as Armenia
    and Azerbidjan are potential strategic partners for the United States,
    Russia and Iran."

    The foreign currency country ceiling for bonds and notes is Baa3,
    which takes into account Moody's recent change in rating methodology,
    that incorporates reduced moratorium risk and sometimes distinguishes
    significantly between the foreign currency country ceilings and
    government foreign currency issuer rating. The country ceiling for
    foreign currency bank deposits is Ba3. The local currency guideline,
    the highest possible rating that could be assigned to obligors and
    obligations denominated in local currency within the country, and the
    local currency bank deposit ceiling are at A3 and Baa1 respectively.
    All ratings carry a stable outlook.
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