Moody’s raises Armenia’s outlook to positive, maintains Ba3 sovereign rating

(Horizon Media) – Moody’s Ratings has upgraded Armenia’s sovereign outlook from stable to positive while affirming the country’s Ba3 long-term issuer ratings in both local and foreign currency.

The agency said the revised outlook reflects declining geopolitical risks and improving prospects for medium-term economic growth. It cited the reduced likelihood of renewed large-scale hostilities with Azerbaijan, Armenia’s increasingly diversified foreign relations and relatively contained domestic political risks.

Regional stability has improved following the U.S.-mediated framework signed by Armenia and Azerbaijan in August 2025, Moody’s said. The agency also pointed to ongoing efforts to normalize relations between Armenia and Türkiye, including discussions on reopening the border and establishing diplomatic ties.

However, Moody’s said a comprehensive Armenia-Azerbaijan peace treaty remains unlikely in the near term, noting that Azerbaijan continues to demand amendments to Armenia’s Constitution.

The agency also highlighted Armenia’s efforts to diversify its foreign policy by deepening relations with the United States and the European Union while preserving substantial economic ties with Russia. Although Moscow has introduced restrictions on certain Armenian imports, their overall economic impact has so far been limited.

Moody’s assessed domestic political risks as manageable despite continued polarization surrounding border delimitation and negotiations with Azerbaijan. It said Nikol Pashinyan’s victory in the June 2026 parliamentary elections is expected to ensure continuity in government policy.

Armenia’s economy is projected to expand by between 5% and 5.5% annually in 2026 and 2027. Growth is expected to be driven by robust domestic demand, continued capital and labour inflows and sustained activity in the trade and services sectors.

Higher government spending on universal health insurance and pensions is also expected to support household consumption.

Moody’s identified stronger relations with the United States as a potential source of major investment. It cited the announced second phase of the U.S.-Armenia artificial intelligence supercomputing data centre project, valued at approximately $3.5 billion—equivalent to roughly 12% of Armenia’s 2025 gross domestic product.

According to the agency, sustained investments of this scale could increase productivity, encourage economic diversification and strengthen Armenia’s long-term growth potential.

Moody’s nevertheless kept Armenia’s rating at Ba3, saying recent economic growth has not yet produced broad structural improvements. Persistently high unemployment, underdeveloped domestic capital markets and continued dependence on external financing remain significant constraints.

The agency also warned that uncertainty surrounding Armenia’s changing relationship with Russia could continue to affect the country’s economic and fiscal outlook.

A future rating upgrade could follow further reforms aimed at improving the business environment, increasing employment and strengthening export competitiveness. Moody’s said Armenia would also need to demonstrate that stronger economic growth is producing lasting improvements in its fiscal and economic fundamentals.

Further progress toward regional normalization, including expanded transport and economic connectivity with Azerbaijan and Türkiye, would also support an upgrade, the agency added.