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Ranking Motion: Moody’s modifications Armenia’s outlook to adverse from steady; affirms Ba3 ratingGlobal Credit score Analysis – 24 Mar 2022Singapore, March 24, 2022 — Moody’s Traders Service (“Moody’s”) has at present affirmed the Authorities of Armenia’s Ba3 native and overseas foreign money long-term issuer scores, in addition to the overseas foreign money senior unsecured scores. Concurrently, Moody’s has modified the outlook to adverse from steady.The drivers of the adverse outlook are Moody’s evaluation of elevated dangers that Armenia’s near- and longer-term development outlook deteriorates materially because of the impression of a pointy weakening of prospects for the Russian economic system, which Armenia is linked to. In flip, weaker development would have a adverse impression on the sovereign’s fiscal profile. As well as, Russia’s invasion of Ukraine has elevated geopolitical dangers associated to Armenia’s unresolved territorial disputes with Azerbaijan.The affirmation of the Ba3 scores incorporates Moody’s evaluation that, making an allowance for the draw back dangers, Armenia’s reasonably excessive establishments and governance power will assist its financial resilience, buffering the impression of shock on its credit score profile.Armenia’s native and overseas foreign money nation ceilings stay unchanged at Baa2 and Ba1, respectively. The four-notch hole between the native foreign money ceiling and the sovereign score displays a stability between the federal government’s small footprint within the economic system and robust establishments, and geopolitical tensions with neighboring nations and exterior deficits that expose the economic system to exterior shocks. The 2-notch hole between the overseas foreign money ceiling and the native foreign money ceiling incorporates Moody’s evaluation of Armenia’s coverage effectiveness and low switch and convertibility dangers even in occasions of stress.RATINGS RATIONALERATIONALE FOR THE CHANGE IN OUTLOOK TO NEGATIVE FROM STABLELONGER-TERM GROWTH RISKS WEAKENINGMoody’s expects near-term downward stress on Armenia’s development outlook, with dangers that this extends to the long term.Stress displays Armenia’s comparatively excessive financial linkages with Russia, whose economic system Moody’s expects to contract sharply within the aftermath of the nation’s invasion of Ukraine. Armenia’s exports to Russia account for about 6% of GDP, whereas remittances from Russia additionally signify roughly 6% of GDP. Given the robust interlinkages, Moody’s initiatives Armenia’s actual GDP development to fall to 1.8% in 2022 and round 3% in 2023, in comparison with earlier forecasts of 5-5.5% for every year.The revised forecasts are pushed by Moody’s expectations that remittances will decline, amid an financial contraction in Russia and a depreciation of the ruble. Moody’s expects whole remittances (together with from different sources) to contract by 20-30% in 2022, in opposition to earlier expectation for remittances to remain roughly flat. It will weigh on Armenian family consumption. As well as, export development will even seemingly stall from decrease demand from Russia, additional weighing on actual GDP development.In the long term, Armenia’s development potential might weaken. This threat displays Moody’s view that worldwide sanctions on Russia will stay for an prolonged time period. In consequence, remittances from Russia and exports to Russia are unlikely to get better to earlier ranges. Armenia’s financial resilience to this shock will rely upon the effectiveness of insurance policies that will assist take up it.DEBT LEVELS TO REMAIN SLIGHTLY HIGHER FOR LONGER, WITH RISKS SKEWED TOWARDS A LARGER FISCAL SHOCKMoody’s additionally expects fiscal consolidation to be on maintain, with Armenia’s debt burden stabilising at a better stage over the medium-term than beforehand anticipated given the extra antagonistic financial outlook weighing on income. Because of decrease development, Moody’s expects the fiscal deficit to remain unchanged at 4-4.5% of GDP in 2022 and 2023, in comparison with earlier expectation for the deficit slender to three% in 2022.In tandem, Moody’s expects the federal government debt to stabilise at a barely greater stage of round 62-63% of GDP over 2022 to 2024, from 60.3% of GDP in 2021. Whereas the federal government has but to announce any further expenditures to assist the economic system, further fiscal assist, whereas supportive of development, would additional delay fiscal consolidation.Armenia’s fiscal profile can also be uncovered to foreign money dangers, with 70% of its debt denominated in overseas foreign money. Whereas not our baseline assumption, a pointy depreciation within the dram would worsen the federal government debt trajectory, whereas additionally growing banking sector dangers given the still-high ranges of dollarisation.GEOPOLITICAL RISKS MAY INTENSIFYGeopolitical dangers may improve, notably with Azerbaijan. Within the close to time period, the Russia-Ukraine navy battle may destabilise the ceasefire settlement over the disputed territory between Armenia and Azerbaijan that Russia brokered in 2020. Ought to there be a major improve in frequency and depth of tensions between Armenia and Azerbaijan, it could weigh on consumption and funding, in addition to fiscal power particularly if the foreign money was beneath stress and/or protection spending elevated markedly.In the long term, Moody’s sees dangers for Armenia stemming from higher uncertainty round how regional states are prone to re-assess relations with Russia within the wake of its invasion of Ukraine.RATIONALE FOR THE AFFIRMATION OF THE Ba3 RATINGArmenia’s Ba3 score displays Moody’s evaluation that the nation’s reasonably excessive establishments and governance power will assist to assist its financial resilience and buffer the impression of the shock. Moody’s expects structural reforms to proceed, which can not less than partially offset the headwinds to Armenia’s longer-term development.The federal government’s 2021-2026 programme outlined an agenda to facilitate the rebalancing of Armenia’s development drivers from home to exterior demand. Armenia has achieved some success in diversifying its export basket. Particularly, the nation has constructed up a burgeoning data expertise (IT) sector, albeit from a low base. The IT sector grew 20% yearly on common from 2016-2020 and accounted for 11% of the nation’s providers exports in 2019 from 8% in 2014. Continued development within the greater value-added IT sector, and additional diversification in its export basket and locations, would augur effectively for Armenia’s productiveness development and improve its resilience to shocks.As well as, the federal government’s debt construction, which is anchored by its massive inventory of multilateral and bilateral financing and borrowed on largely concessional phrases with lengthy tenors and low rates of interest, helps debt affordability and reduces authorities liquidity threat.ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONSArmenia’s ESG Credit score Affect Rating is reasonably adverse (CIS-3), pushed primarily by reasonably adverse social and environmental dangers, with low governance threat that’s underpinned by a observe document of coverage effectiveness and institutional reforms.Armenia’s publicity to environmental dangers is reasonably adverse (E-3), reflecting the nation’s reasonable publicity to warmth and water stress, sizeable agricultural sector and its landlocked geography and small land space, with low publicity to air pollution, water constraints, and carbon transition threat, given the economic system’s low dependence on hydrocarbon income and exports. Armenia’s rating is essentially in step with regional neighbors.Armenia’s social threat publicity is reasonably adverse (S-3) and is pushed by demographic challenges together with a small, getting old inhabitants and a excessive stage of youth unemployment that will act as a drag on long-term potential development. Excessive emigration by greater expert Armenians helps inbound remittances, a mitigating issue, but additionally exacerbates demographic dynamics.The pivot to greater productiveness providers sectors together with data expertise might assist to mitigate these dangers. Reasonable dangers stem from comparable ranges of housing and well being care provision, life expectancy, and entry to fundamental providers noticed in different sovereigns within the area.Armenia’s governance threat publicity (G-2) is impartial to low, reflecting the relative power versus friends in financial policymaking, with a observe document of fiscal and financial prudence, and preliminary progress towards institutional reforms. Ongoing challenges embody the management of corruption and rule of regulation in comparison with friends, though perceptions have just lately improved and institutional reforms to deal with these points, largely with worldwide technical help, are among the many authorities’s high priorities. The banking system’s massive dimension and important dollarization stage pose challenges to the effectiveness of macroprudential and regulatory insurance policies to mitigate dangers to monetary stability.GDP per capita (PPP foundation, US$): 13,329 (2020 Precise) (also called Per Capita Earnings)Actual GDP development (% change): -7.4% (2020 Precise) (also called GDP Progress)Inflation Charge (CPI, % change Dec/Dec): 3.7% (2020 Precise)Gen. Gov. Monetary Steadiness/GDP: -5.1% (2020 Precise) (also called Fiscal Steadiness)Present Account Steadiness/GDP: -3.8% (2020 Precise) (also called Exterior Steadiness)Financial resiliency: ba1Default historical past: No default occasions (on bonds or loans) have been recorded since 1983.On 21 March 2022, a score committee was known as to debate the score of the Armenia, Authorities of. The details raised throughout the dialogue had been: The issuer’s financial fundamentals, together with its financial power, have materially decreased. The issuer’s fiscal or monetary power, together with its debt profile, has materially decreased.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSFACTORS THAT COULD LEAD TO AN UPGRADEThe adverse outlook indicators {that a} score improve is unlikely over the close to time period. The outlook would seemingly be modified to steady if Armenia’s development outlook had been to be higher than Moody’s present expectations, containing the deterioration within the authorities’s fiscal and debt metrics. Indicators of sooner and sustained fiscal consolidation as soon as the near-term pressures on development fade would even be credit score constructive.Ongoing and additional reforms that translate into sustained enhancements in financial competitiveness and the enterprise local weather, supporting financial diversification and resiliency, would additionally create situations for a steady outlook.FACTORS THAT COULD LEAD TO A DOWNGRADEThe score would seemingly be downgraded if it seemed growing seemingly that Armenia’s long-term development prospects and/or fiscal power had been markedly weakened in comparison with Moody’s present expectations. A renewed and lasting escalation of tensions with Azerbaijan into full-scale battle, would additionally put downward stress on the score.The principal methodology utilized in these scores was Sovereign Rankings Methodology revealed in November 2019 and obtainable at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1158631. Alternatively, please see the Ranking Methodologies web page on www.moodys.com for a replica of this system.The weighting of all score components is described within the methodology used on this credit standing motion, if relevant.REGULATORY DISCLOSURESFor additional specification of Moody’s key score assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure kind. Moody’s Ranking Symbols and Definitions might be discovered at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For scores issued on a program, collection, class/class of debt or safety this announcement gives sure regulatory disclosures in relation to every score of a subsequently issued bond or be aware of the identical collection, class/class of debt, safety or pursuant to a program for which the scores are derived completely from current scores in accordance with Moody’s score practices. For scores issued on a assist supplier, this announcement gives sure regulatory disclosures in relation to the credit standing motion on the assist supplier and in relation to every explicit credit standing motion for securities that derive their credit score scores from the assist supplier’s credit standing. For provisional scores, this announcement gives sure regulatory disclosures in relation to the provisional score assigned, and in relation to a definitive score which may be assigned subsequent to the ultimate issuance of the debt, in every case the place the transaction construction and phrases haven’t modified previous to the task of the definitive score in a way that may have affected the score. For additional data please see the scores tab on the issuer/entity web page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit score assist from the first entity(ies) of this credit standing motion, and whose scores might change because of this credit standing motion, the related regulatory disclosures will probably be these of the guarantor entity. Exceptions to this method exist for the next disclosures, if relevant to jurisdiction: Ancillary Providers, Disclosure to rated entity, Disclosure from rated entity.The scores have been disclosed to the rated entity or its designated agent(s) and issued with no modification ensuing from that disclosure.These scores are solicited. Please confer with Moody’s Coverage for Designating and Assigning Unsolicited Credit score Rankings obtainable on its web site www.moodys.com.Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated score outlook or score evaluate.Moody’s normal rules for assessing environmental, social and governance (ESG) dangers in our credit score evaluation might be discovered at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The International Scale Credit score Ranking on this Credit score Ranking Announcement was issued by certainly one of Moody’s associates outdoors the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Essential 60322, Germany, in accordance with Artwork.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit score Ranking Companies. Additional data on the EU endorsement standing and on the Moody’s workplace that issued the credit standing is on the market on www.moodys.com.The International Scale Credit score Ranking on this Credit score Ranking Announcement was issued by certainly one of Moody’s associates outdoors the UK and is endorsed by Moody’s Traders Service Restricted, One Canada Sq., Canary Wharf, London E14 5FA beneath the regulation relevant to credit standing businesses within the UK. Additional data on the UK endorsement standing and on the Moody’s workplace that issued the credit standing is on the market on www.moodys.com.Please see www.moodys.com for any updates on modifications to the lead score analyst and to the Moody’s authorized entity that has issued the score.Please see the scores tab on the issuer/entity web page on www.moodys.com for added regulatory disclosures for every credit standing. Grace Lim Analyst Sovereign Danger Group Moody’s Traders Service Singapore Pte. Ltd. 50 Raffles Place #23-06 Singapore Land Tower Singapore, 48623 Singapore JOURNALISTS: 852 3758 1350 Shopper Service: 852 3551 3077 Marie Diron MD – Sovereign Danger Sovereign Danger Group JOURNALISTS: 44 20 7772 5456 Shopper Service: 44 20 7772 5454 Releasing Workplace: Moody’s Traders Service Singapore Pte. Ltd. 50 Raffles Place #23-06 Singapore Land Tower Singapore, 48623 Singapore JOURNALISTS: 852 3758 1350 Shopper Service: 852 3551 3077 © 2022 Moody’s Company, Moody’s Traders Service, Inc., Moody’s Analytics, Inc. and/or their licensors and associates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY’S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. 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Nonetheless, MOODY’S just isn’t an auditor and can’t in each occasion independently confirm or validate data acquired within the score course of or in getting ready its Publications.To the extent permitted by regulation, MOODY’S and its administrators, officers, staff, brokers, representatives, licensors and suppliers disclaim legal responsibility to any particular person or entity for any oblique, particular, consequential, or incidental losses or damages by any means arising from or in reference to the data contained herein or using or incapacity to make use of any such data, even when MOODY’S or any of its administrators, officers, staff, brokers, representatives, licensors or suppliers is suggested prematurely of the potential of such losses or damages, together with however not restricted to: (a) any lack of current or potential earnings or (b) any loss or injury arising the place the related monetary instrument just isn’t the topic of a specific credit standing assigned by MOODY’S.To the extent permitted by regulation, MOODY’S and its administrators, officers, staff, brokers, representatives, licensors and suppliers disclaim legal responsibility for any direct or compensatory losses or damages precipitated to any particular person or entity, together with however not restricted to by any negligence (however excluding fraud, willful misconduct or some other sort of legal responsibility that, for the avoidance of doubt, by regulation can’t be excluded) on the a part of, or any contingency inside or past the management of, MOODY’S or any of its administrators, officers, staff, brokers, representatives, licensors or suppliers, arising from or in reference to the data contained herein or using or incapacity to make use of any such data.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Traders Service, Inc., a wholly-owned credit standing company subsidiary of Moody’s Company (“MCO”), hereby discloses that the majority issuers of debt securities (together with company and municipal bonds, debentures, notes and industrial paper) and most popular inventory rated by Moody’s Traders Service, Inc. have, previous to task of any credit standing, agreed to pay to Moody’s Traders Service, Inc. for credit score scores opinions and providers rendered by it charges starting from $1,000 to roughly $5,000,000. 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