FITCH DOWNGRADES ARMENIA’S IDR RATING TO ‘BB’-

ARKA
Aug 14, 2009

YEREVAN, August 14, /ARKA/.Fitch Ratings has downgraded on August
13 Armenia’s long-term foreign and local currency Issuer Default
Ratings (IDR) to ‘BB-‘ from ‘BB’. The Outlooks are Stable. According
to fitchratings.ru website, the agency has also downgraded the Country
Ceiling to ‘BB’ from ‘BB+’ and affirmed the short-term foreign currency
IDR at ‘B’."

Despite a strong policy response supported by the international
community, the severity of the shock has materially weakened Armenia’s
credit fundamentals and medium-term prospects," said Andrew Colquhoun,
Director in Fitch’s Sovereigns Group. "Unlocking Armenia’s economic
potential and restoring strong and sustained growth necessary to
reduce poverty and raise incomes will be much harder as a result of
the crisis."

The Stable Outlook reflects Fitch’s assessment that the near-term
risks to macroeconomic and financial stability are relatively
low given the policy response and support from the international
financial community. Armenia’s ‘BB-‘ ratings remain supported by
still moderate levels of public and external indebtedness and a more
favorable business environment than many ‘BB’ rated peers. However,
the severity of the shock – Armenia’s economy is estimated to have
shrunk 16.3% year-on-year in the first half of 2009 – underscores the
narrow base of economic activity, exposure to economic volatility in
Russia in particular and very limited financing flexibility.

The re-dollarisation of bank deposits also highlights the damage the
crisis has wrought to the efforts of the authorities in recent years
to increase confidence in the Armenian dram.

In 2006, June Armenia received an international credit rating for
the first time. Fitch assigned it a lower ‘BB-‘ sovereign credit
rating indicating a relatively high risk of doing business, as the
economy remained vulnerable to shocks due to its high degree of
dollarization, underdeveloped financial services and low value-added
economic activity. Armenia also received the short-term foreign
currency IDR at ‘B’ and a Country Ceiling at ‘BB-‘.

In 2008 July Fitch upgraded Armenia’s long-term foreign and local
currency Issuer Default Rating (IDR) from ‘BB-‘ to ‘BB’ and changed
the outlooks from positive to stable.

From: Emil Lazarian | Ararat NewsPress