YEREVAN, July 4. /ARKA/. Fitch has revised its growth projection up to 3.4% for 2017, with upside risks from stronger than expected public sector capital spending and faster export growth. Growth could accelerate further in 2018-19, but improving the country's medium-term growth prospects is likely to require further progress in improving the investment climate, as total investment is low at 18.4% of GDP.

Armenia's exports are growing strongly, which helped its current account deficit to remain roughly stable at 2.7% of GDP in 2016. A favourable international environment characterised by a recovery in commodity prices, improved export diversification and stabilisation of the Russian economy will benefit export and remittances receipts, leading the current account deficit to average 2.1% in 2017-2018, almost half the expected 'B' median. Lower current account deficits help mitigate external vulnerabilities given Armenia's small size and commodity dependence, as well as helping to support stabilisation of the country's high net external debt of 46.7% of GDP vs 20% for the rating category median.

The country is continuing to adjust following the external shock in 2014-15 from the drop in commodity prices and remittances from Russia. GDP growth has recovered strongly reaching 6.5% in 1Q17, after the sharp deceleration to 0.2% in 2016.

Fitch expects Armenia's general government deficit to narrow to 3.3% of GDP in 2017 after ballooning to 5.5% of GDP in 2016, compared with an original target of 3.5%.

Fitch Ratings has affirmed Armenia's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'B+' with Stable Outlook.

In the government budget for 2017, GDP growth is projected at 3.2%. The World Bank forecasts a 2.7 percent growth for Armenia in 2017, the International Monetary Fund predicts a 2.9% growth, the United Nations up to 2.5%, the European Bank for Reconstruction and Development 2.5% and the Asian Development Bank 2.2%. --0---