FITCH RATINGS: ARMENIA TO RECORD 15-PERCENT ECONOMIC DECLINE IN 2009

ARKA
Aug 14, 2009

YEREVAN, August 14. /ARKA/. Experts at Fitch Ratings International
Rating Agency expect Armenia’s economy to shrink 15% in 2009.

According to the information placed in the agency’s website
, this is the third worst result among
reviewed countries.

The experts point out that this result indicates the vulnerability
of the economy, which has small size and narrow base, as well as
dependent on the remittances of citizens working abroad.

Remittance inflows, which were worth some 9 percent of GDP in 2008,
have fallen sharply as the Russian economy, where many Armenians work,
has suffered a severe recession. The fiscal deficit is now projected
to reach 7.5 percent of GDP in 2009 and the current account deficit
could hit 13 percent.

Exports almost halved in the first half of 2009 despite a 20 percent
devaluation of the dram in March 2009.

Since then, Armenia clinched a $820 million stand-by deal with the
IMF and a further $1.2 billion in funding from international financial
institutions and Russia.

As a result of this support, Armenia’s public and external debt ratios
will rise sharply in 2009, exacerbated by falls in GDP, exports and
tax revenues, and the country will need state and outside financing,
if reduction in deficits and current operations take time, while
higher levels of debt waiting for payoff.0D

Fitch also thinks Armenia’s funding options beyond official-sector
creditors are limited, partly owing to the small size of the domestic
financial system.

The agency’s experts also voiced concern over Armenia’s heavy
dependence on external financing from Russia and the IMF.

With a lack of other funding options, a sharp fall in remittances from
Russia and the re-dollarisation of bank deposits after Armenia’s dram
devaluation undermined confidence in the currency.

Although outside creditors help Armenia avoid large-scale crisis in
payment balance earlier this year, this episode affected its financial
stability and creditability.

Fitch cut Armenia’s long-term foreign and local currency Issuer
Default Ratings to ‘BB-‘ from ‘BB’ with stable outlook, supported by
still moderate levels of public and external indebtedness.

Outlook on the ratings stable, there was circulated today in a press
release agency. Fitch also downgraded the country ceiling rating from
BB to BB level and confirmed the short-term RDE in foreign currency
B.

From: Emil Lazarian | Ararat NewsPress