Manaseryan questions Moody’s decision to downgrade Armenia’s issuer and government bond rating to ba3 from ba2

YEREVAN, January 16. / ARKA /. An Armenian economist Tatul Manaseryan has questioned today Moody's Investors Service’s decision to downgrade Armenia's issuer and government bond rating to Ba3 from Ba2, and changing the outlook to negative from stable, saying the decision is not supported by ‘valid grounds.’

Speaking to ARKA news agency Manaseryan, who is head of a local think-tank called Alternative, argued that "Armenia is experiencing some economic difficulties, in the first place relating to competitiveness of goods and services,’ however, according to his estimates, one can not fail to notice some progress in economic indicators made over the past two or three years, such as a faster growth of exports over imports, creation of new businesses and stimulation of companies which  are able to not only meet local demand, but also to produce competitive products for export.

"In fact, it is difficult to assess the situation, to weigh the pros and cons because  both trends are present in our economy", he added.

Manaseryan did not deny that the Armenian economy has many problems such as inefficient fight against monopolies, low competitiveness, but stressed that such problems exist in many other post-Soviet countries. He said a decline in global economic growth last year,  including in Russia and several European countries,  has affected Armenia’s economy as well.

"According to our estimates, Armenian economy grew last year by 4% and in 2015 it may reach 5%, if not higher. Such rates of economic growth are not seen in European countries and Russia, where a decline is expected this year," said Manaseryan.

He then claimed that Moody’s decision to downgrade Armenia’s issuer and government bond rating might have been prompted by political reasons because of Armenia’s membership in the Russia-led Eurasian Economic Union that has become effective on January 1.

In his view, one of Moody’s arguments related to restrictions on trade with countries outside the Eurasian Economic Union is very biased and politicized.

"I would be surprised if a Western agency endorsed Armenia’s integration with the Eurasian Economic Union. However, it does not take into account that Armenia continues to develop ties with Western countries, including the EU,” he said.

The key drivers for the downgrade cited by Moody’s are Armenia’s increased external vulnerability due to declining remittances from Russia, an uncertain outlook for foreign direct investment (FDI), an elevated susceptibility to exchange rate volatility, and expected pressure on foreign exchange (FX) reserves.

In September 2014, Moody's revised its forecast for Armenia’s GDP growth in  2014 downwards from 3.2% to 2.1%  saying Armenian economy will continue to be adversely affected by an economic slowdown in Russia due to the economic linkages between the two countries. -0-