Budapest Business Journal, Hungary
Dec 19 2008
Moody’s issues annual report on Armenia
Friday 8:35, December 19th, 2008
Armenia’s Ba2 government bond ratings and stable outlook are supported
by its manageable debt levels, says Moody’s Investors Service in its
annual report on the country.
The ratings are constrained by the low level of economic and
institutional development of the country, along with its concentrated
economic base and volatile neighborhood.
`Armenia has not been directly affected by the global credit crunch
although second-round effects are now being felt from the compression
of world demand and the difficult conditions in Russia, its primary
trading partner and the source of large diaspora remittances,’ said
Moody’s Associate Vice President Joan Feldbaum-Vidra, Moody’s
sovereign analyst for Armenia.
She said growth is likely to decelerate sharply in the next few years
even as the government moves forward with large public sector
investment projects financed by multilateral funds. The spending on
such projects should help sustain the growth momentum even as the
fiscal deficits are set to shrink.
`The country’s low government debt and minimal refinancing risks are
allowing its rating to maintain a stable outlook in the current
environment,’ said Feldbaum-Vidra. `A weak revenue base is the main
fiscal risk, although it is ameliorated by the very comfortable debt
service profile, its good relations with its official creditors, and
the liquidity provided by the expatriate Armenian community.’
Moody’s reports that Armenia’s economic prospects continue to be
hampered by strained relations with Turkey and Azerbaijan, and that
the border between Turkey and Armenia is closed, increasing the cost
of both exports and imports.
`Armenia’s low institutional strength is another constraint on its
ratings,’ said Feldbaum-Vidra. `The authorities are very keen to
address this, recognizing that high levels of corruption and a
suboptimal business climate need to be corrected in order to achieve
long-term sustainable growth and to attract investment.’
Moody’s first-ever ratings for Armenia were assigned in 2006 and
include a Baa3 ceiling to foreign currency bonds and notes and a Ba3
ceiling for foreign currency bank deposits, all with stable
outlooks. (press release)
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