Fitch downgrades Armenia’s IDR rating to ‘BB’-

YEREVAN, August 14, /ARKA/.Fitch Ratings has downgraded on August 13 Armenia's long-term foreign and local currency Issuer Default Ratings (IDR) to 'BB-' from 'BB'. The Outlooks are Stable. According to fitchratings.ru website, the agency has also downgraded the Country Ceiling to 'BB' from 'BB+' and affirmed the short-term foreign currency IDR at 'B'."

Despite a strong policy response supported by the international community, the severity of the shock has materially weakened Armenia's credit fundamentals and medium-term prospects," said Andrew Colquhoun, Director in Fitch's Sovereigns Group. "Unlocking Armenia's economic potential and restoring strong and sustained growth necessary to reduce poverty and raise incomes will be much harder as a result of the crisis."

The Stable Outlook reflects Fitch's assessment that the near-term risks to macroeconomic and financial stability are relatively low given the policy response and support from the international financial community. Armenia's 'BB-' ratings remain supported by still moderate levels of public and external indebtedness and a more favorable business environment than many 'BB' rated peers. However, the severity of the shock - Armenia's economy is estimated to have shrunk 16.3% year-on-year in the first half of 2009 - underscores the narrow base of economic activity, exposure to economic volatility in Russia in particular and very limited financing flexibility. The re-dollarisation of bank deposits also highlights the damage the crisis has wrought to the efforts of the authorities in recent years to increase confidence in the Armenian dram.

In 2006, June Armenia received an international credit rating for the first time. Fitch assigned it a lower 'BB-' sovereign credit rating indicating a relatively high risk of doing business, as the economy remained vulnerable to shocks due to its high degree of dollarization, underdeveloped financial services and low value-added economic activity. Armenia also received the short-term foreign currency IDR at ‘B’ and a Country Ceiling at 'BB-'.

In 2008 July Fitch upgraded Armenia’s long-term foreign and local currency Issuer Default Rating (IDR) from ‘BB-‘ to ‘BB’ and changed the outlooks from positive to stable. M.M. -0-