IHS GLOBAL INSIGHT CUTS OUTLOOK ON ARMENIAN SOVEREIGN RATING TO STABLE
Venla Sipila

World Markets Research Centre
Dec 18 2008

In our fourth-quarter sovereign risk review round, we have cut
the outlook on our rating for Armenia to stable from positive,
while retaining the assessment at 55 (B+ on the generic scale). This
adjustment reflects increased uncertainty related to the outlook for
foreign currency inflows. The availability of foreign investment may
become stretched as global growth weakens and international liquidity
remains tight. Similarly, the outlook for continued strong remittance
inflows may suffer due to similar reasons, and not least because these
are to a high degree dependent on economic fortunes of Russia, where
economic outlook has recently also clearly deteriorated. Moreover,
with weakening global growth, also export prospects have deteriorated
further from an already relatively poor position. Financing of the
wide current-account gap remains dependent on investment inflows,
and thus, the risk of increasing liquidity pressures remains relevant.

Significance:Armenia’s sovereign risk rating remains supported
by the authorities so-far strong reform commitment and relatively
prudent macroeconomic policies. However, the rating signals high
payments risk. In the current challenging international financial
and economic environment, developments in Armenia’s sovereign
creditworthiness warrant close monitoring. For example, further
indications of deterioration in the liquidity gap would lead us to
shift the outlook to negative.

From: Emil Lazarian | Ararat NewsPress