Fitch keeps Armenia’s credit rating at ‘BB-’ with positive outlook

(Horizon Media / YEREVAN) — Fitch Ratings has affirmed Armenia’s long-term sovereign credit rating at “BB-” while maintaining a Positive Outlook, citing stronger foreign currency reserves, continued economic growth and reduced near-term risks of renewed conflict with Azerbaijan.

The agency said the US-sponsored peace framework has lowered the likelihood of an immediate military escalation. However, it warned that uncertainty surrounding the conclusion of a final agreement remains, particularly because Azerbaijan’s demand for constitutional changes in Armenia could require a referendum, possibly in 2027.

Fitch also identified Armenia’s deteriorating relations with Russia as a major economic risk. Russia remains Armenia’s largest trading partner, supplies more than 80 per cent of its imported natural gas and accounts for roughly 35 per cent of Armenian goods exports.

Recent Russian restrictions on Armenian food imports and transit, as well as warnings over preferential energy and diamond arrangements, could place pressure on economic growth, inflation, public finances and the country’s external position. Fitch noted that natural gas accounts for about 61 per cent of Armenia’s energy needs, leaving the country vulnerable to potential supply disruptions or price increases.

Armenia’s economy expanded by 7.1 per cent in 2025, while Fitch expects growth to slow to 5.2 per cent in 2026 — still well above the average for similarly rated countries. Medium-term growth is projected to remain near five per cent, supported by the information technology sector, the planned opening of the Amulsar gold mine and major infrastructure projects.

The agency said the proposed TRIPP transit route connecting Azerbaijan with Nakhchivan through Armenia, the possible reopening of the Turkey-Armenia border and plans for a large artificial intelligence data centre could provide further economic benefits. However, these prospects remain dependent on geopolitical stability and the successful implementation of regional agreements.

Inflation is expected to average 4.4 per cent in 2026 before gradually returning toward the Central Bank of Armenia’s three per cent target. Fitch anticipates that the central bank may temporarily raise its policy rate by 0.25 percentage points to 6.75 per cent.

Armenia’s budget deficit reached 3.7 per cent of GDP in 2025, performing better than the government’s target but remaining above the average among “BB”-rated countries. Fitch expects spending pressures to continue because of the introduction of universal health care and higher pensions, although declining defence and security expenditures may partly offset those costs.

Government debt fell to 47.2 per cent of GDP at the end of 2025 and is expected to remain broadly stable over the coming years. Armenia’s foreign currency reserves also reached a record $5.9 billion at the end of May, strengthening the country’s ability to absorb external shocks.

Nevertheless, Fitch warned that Armenia’s current account deficit remains high and that reserve coverage is still below the median for similarly rated states. The agency also pointed to rapid private-sector lending growth but said Armenian banks remain well capitalized, liquid and profitable.

Fitch said Armenia could receive a rating upgrade if geopolitical risks decline, economic growth remains strong and public debt follows a stable or downward path. Conversely, renewed conflict, a collapse of the peace process, worsening tensions with Russia or persistent external and fiscal imbalances could lead to negative rating action.