Armenia's government debt structure remains stable with positive declining trend, Raex-Europe says

16.01.2020 14:40
Armenia's government debt structure remains stable with positive declining trend, Raex-Europe says

YEREVAN, January 16. /ARKA/. Armenia's government debt structure remains stable, RAEX-Europe said. RAEX-Europe said also it has confirmed the sovereign government credit rating (SGC) of Armenia at ‘BB-’ (sufficient level of creditworthiness of the government) in national currency and at ‘BB-’ (sufficient level of creditworthiness of the government) in foreign currency. The rating outlook is positive which means that in the mid-term perspective there is a high probability of upgrading the rating score.

It said as of November 2019, short-term debt accounted for 4.6% of total debt, 15% had floating interest rate and FX-denominated debt remained elevated at 78.6%; however, this type of debt remains mostly concessional.

It said also the level of government debt continues to be significant with a positive declining trend in 2019. According to RAEX-Europe's estimations, gross government debt will be slightly higher than 50% of GDP and 212% of budget revenues. According to the current fiscal policy, the government will intend to maintain such level in the mid-term horizon; Levels of unemployment in Armenia remained high in 2019 and are expected to be close to 18%.

It also said the economy showed remarkable growth in 2019 with more then 7% real GDP growth in 3Q reported by the national statistical service of Armenia as a result of solid private consumption and investment. On the production side, the largest growth belongs to the mining industry and accommodation and food service activities with 45.2% and 30% increase since the beginning of the year respectively.

The inflation rate in 2019 is expected to be at 1%, well below the initial target of 4% from the CBA. In September 2019, the CBA cut the refinancing rate by 0.25 p.p. for the second time in the year down to 5.5%. Monetary policy stimulus should bring inflation closer to the target in the medium term. In general, we continue to observe effective monetary policy with high credibility and an improved transmission mechanism, which has contributed to the fall of lending rates. Average interest rates on loans extended by commercial banks in local currencies decreased by 0.8 p.p. y-o-y in November 2019.

According to Armenia's National Statistics Committee, the country's total public debt at the end of September 2019 stood at $7. 051.177 billion, having increased by $78.169 million from the previous month. According to the Ministry of Finance, the country's public debt at the end of the year make 50.3% of GDP to stand at $6.94 billion .

Fitch Ratings predicts that the total public debt of Armenia will decrease to 51.2% of GDP in 2019 and to 48.4% in 2021. -0-


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