Rating affirmation and outlook

S&P Global Ratings affirmed Armenia's long‑ and short‑term sovereign credit ratings at BB‑/B for both foreign and local currency obligations, maintaining a positive outlook on the long‑term rating.

Reserve buildup and external buffers

Armenia’s foreign‑currency reserves surged by roughly 40 % year‑on‑year, reaching a record $6.9 billion in June 2026. This substantial increase materially strengthens the country’s external buffers and reduces balance‑of‑payments vulnerabilities despite ongoing current‑account deficits.

Economic growth and fiscal outlook

S&P projects real GDP growth to decelerate to 4.9 % in 2026, down from 7.1 % in 2025. The slowdown reflects weaker consumption and export performance, partly due to Russia’s import restrictions on selected Armenian goods. For the 2027‑2029 period, the firm expects an average growth rate of 5 %, supported by consumption and investment activity.

The general government fiscal deficit is forecast to narrow to about 4.2 % of GDP in 2026, which is below the official budget target of 4.5 % of GDP.

Trade restrictions and current‑account dynamics

Since late April 2026, Russia has progressively tightened import restrictions on Armenian products, expanding from mineral water and alcoholic beverages to flowers, fish products, and a broad range of fresh fruit and vegetables. These restricted exports together account for approximately 2 % of Armenia’s GDP.

Despite these trade constraints, S&P expects the current‑account deficit to modestly narrow to 8.0 % of GDP in 2026, improving from 8.7 % of GDP in 2025, driven by softer domestic demand and resilient services exports.

Political and geopolitical context

The Civil Contract party’s renewed parliamentary majority reinforces policy continuity, potentially giving the government greater scope to advance structural reforms and fiscal consolidation. However, geopolitical uncertainty—including delayed signing and implementation of the peace agreement with Azerbaijan—could postpone anticipated benefits from further normalization, such as enhanced transit and trade flows.

Armenia remains exposed to moderating yet material geopolitical and external security risks, an evolving institutional setting, moderate per‑capita income levels, and lingering balance‑of‑payments vulnerabilities, all of which constrain the sovereign rating.

---