By Mark Dovich
S&P Global Ratings has raised the Armenian government’s credit outlook to “positive” from “stable,” just weeks after Fitch Ratings announced a similar upgrade. Both agencies cited last year’s influx of tens of thousands of Russians as a major factor.
“The war in Ukraine triggered strong inflows of labor and capital from Russia to Armenia, which boosted Armenia’s real GDP growth,” S&P said in a statement last Friday. “There is an increased likelihood that Armenia’s potential growth rate, as well as its fiscal and external balance sheets, will remain permanently stronger than before the war.”
Armenia’s gross domestic product grew by a record 12.6% in 2022, according to preliminary data from the state-run Statistical Committee. Armenian banks saw an unprecedented net inflow of $2.5 billion last year, Central Bank numbers show, with over 70% of the transfers coming from Russia alone.
About 65,000 Russians have moved to Armenia since Russia’s full-scale invasion of Ukraine began, figures from Armenia’s Migration and Citizenship Service suggest. Many are highly skilled information technology workers.
S&P noted it is “unlikely there will be a sharp reversal in financial and labor inflows to Armenia in the next 12 months,” echoing Fitch’s prediction earlier this month that “a substantial proportion of new immigrants will stay in Armenia for at least two to three years.”
S&P is forecasting Armenia’s GDP will increase by 4.0% in 2023, while Fitch is anticipating substantially higher growth, at 6.3%. Last month, the head of Armenia’s Central Bank said he expects the country’s economy will expand by 4.6% this year.
Meanwhile, S&P kept Armenia’s long-term and short-term sovereign credit ratings at B+ and B, respectively. Similarly, Fitch affirmed Armenia’s long-term foreign-currency issuer default rating at B+. All three ratings indicate a relatively high level of credit risk.
S&P and Fitch, together with Moody’s Investors Service, are commonly known as the “big three” credit rating agencies and dominate the global market.
