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Trend, Azerbaijan
Aug 24 2012
Fitch confirms Armenia's weakness in absorbing further external shocks
Azerbaijan, Baku, Aug. 23 / Trend /
The current account deficit (CAD) of Armenia narrowed to 11% of GDP in
2011, but was still the second largest in Emerging Europe and the
third widest among 'BB' rated sovereigns, Fitch Ratings said on
Thursday.
"It is well above its pre-crisis level. Slowing growth in export
earnings, linked to falling metals prices, will limit further progress
in 2012," the agency's experts believe.
According to Fitch Ratings, with only half of the CAD financed by
foreign direct investment, the remainder is financed by external
borrowing, pushing up net external indebtedness.
According to the report, public debt may stabilise at around 45% of
GDP. However, this ratio is unusually sensitive to exchange rate
movements, given that 84% of public debt is in foreign currency,
mainly from multilateral lenders.
Armenia will start to make net repayments to the IMF in 2013. CBA and
government repayments to the IMF are to peak in 2013 at USD279m (2.6%
of forecast GDP or one-sixth of CBA reserves). Reserves will therefore
stay flat or decline. Fitch expects the government to seek a successor
agreement to the Extended Fund Facility/Extended Credit Facility
expiring in June 2013. The government expects to refinance its direct
obligations to the Fund from multilateral sources.
"Armenia's ability to absorb further external shocks is weaker than in
2008, as government and external debt have multiplied. Pressure on
reserves or the dram - following an external shock - would lead to
negative rating action. Any shortfall in capital inflows would
increase risks of currency devaluation," the agency believes.
Fitch Ratings has affirmed Armenia's Long-term foreign and local
currency Issuer Default Ratings (IDR) at 'BB-'. The Outlook on the
Long-term IDRs is Stable. At the same time, Fitch has affirmed the
Short-term foreign currency IDR at 'B' and Country Ceiling at 'BB'.
Aug 24 2012
Fitch confirms Armenia's weakness in absorbing further external shocks
Azerbaijan, Baku, Aug. 23 / Trend /
The current account deficit (CAD) of Armenia narrowed to 11% of GDP in
2011, but was still the second largest in Emerging Europe and the
third widest among 'BB' rated sovereigns, Fitch Ratings said on
Thursday.
"It is well above its pre-crisis level. Slowing growth in export
earnings, linked to falling metals prices, will limit further progress
in 2012," the agency's experts believe.
According to Fitch Ratings, with only half of the CAD financed by
foreign direct investment, the remainder is financed by external
borrowing, pushing up net external indebtedness.
According to the report, public debt may stabilise at around 45% of
GDP. However, this ratio is unusually sensitive to exchange rate
movements, given that 84% of public debt is in foreign currency,
mainly from multilateral lenders.
Armenia will start to make net repayments to the IMF in 2013. CBA and
government repayments to the IMF are to peak in 2013 at USD279m (2.6%
of forecast GDP or one-sixth of CBA reserves). Reserves will therefore
stay flat or decline. Fitch expects the government to seek a successor
agreement to the Extended Fund Facility/Extended Credit Facility
expiring in June 2013. The government expects to refinance its direct
obligations to the Fund from multilateral sources.
"Armenia's ability to absorb further external shocks is weaker than in
2008, as government and external debt have multiplied. Pressure on
reserves or the dram - following an external shock - would lead to
negative rating action. Any shortfall in capital inflows would
increase risks of currency devaluation," the agency believes.
Fitch Ratings has affirmed Armenia's Long-term foreign and local
currency Issuer Default Ratings (IDR) at 'BB-'. The Outlook on the
Long-term IDRs is Stable. At the same time, Fitch has affirmed the
Short-term foreign currency IDR at 'B' and Country Ceiling at 'BB'.