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Fitch revises Armenia's outlook to positive

Fitch Ratings revised the outlook on Armenia's long-term foreign- and local-currency issuer default ratings to positive from stable, while affirming the ratings at B+.

In its Dec. 15 action, the rating agency cited Armenia's structural improvement in export performance, stronger external demand conditions, improving remittances and its sustainable monetary policy framework.

With GDP growth averaging 5.3% between the first and third quarters of 2017, Fitch expects the country's economy to grow by 4.3% for the year, up from its previous estimate of 3.4%. Moreover, it forecasts average growth to average 3.6% in 2018-19 due to the environment being favorable for remittances and growth.

The rating agency said that the general government budget deficit in 2017 will fall to 3.3% of GDP compared to 2016's 5.5%, because of revenue growth and expenditure control. It forecasts a further reduction to 3% in 2018 and 2.7% in 2019, which fall lower than the B and BB medians.

Fitch also expects debt in 2017 to climb to 57.5% of GDP, lower than the B median of 58.6%, and rise to 58.1% in 2018 before declining thereafter. The rating agency noted that the government debt structure is exposed to exchange rate volatility as 81% of the concessional debt is in foreign currency.

Fitch forecasts the already moderate current account deficit to stand at 3% of GDP in 2017 before averaging 3.4% in 2018-19. The rating agency expects this to lessen external weaknesses created by the small size of the economy and commodity dependence, and reduce net external debt to 44.8% of GDP by the end of 2017, against 20% for B median countries.