BAKU, Azerbaijan, January 28. Fitch Ratings, the international rating agency, asserts that Armenia's economy relies significantly on Russia for both trade and energy, Trend reports.
The agency does not expect meaningful diversification from Russia in the near future while noting that Armenia's relations with Russia remain strained.
"Despite Armenia's ongoing application of Western sanctions on Russian enterprises in the banking sector, the country has experienced an almost 300 percent increase in exports of goods to Russia since 2021. Notably, Russia constituted 51 percent of Armenia's exports and 30 percent of its imports in the first three quarters of 2023," Fitch said in the report.
Additionally, the rating agency highlights geopolitical risks in the South Caucasus. Following the events of September 2023, Fitch analysts note that Armenia is actively seeking to negotiate a peace agreement with Azerbaijan.
"In our perspective, lingering geopolitical risks persist, given unresolved issues between the two nations. These include the establishment of open land links between the main part of Azerbaijan and its Nakhchivan, traversing Armenian territory, as well as ongoing challenges in border demarcation in certain areas," the report says.
Fitch experts also shared some pessimistic forecasts regarding Armenia's economic performance.
"Armenia faces challenges with a substantial (though decreasing) portion of foreign currency-denominated public debt, a relatively vulnerable external financing situation, and a financial sector characterized by high dollarization. The budget deficit is projected to temporarily expand to 4.5 percent in 2024. Fitch anticipates that a weakened Armenian Dram (AMD) will contribute to higher inflation rates in 2024-2025, averaging 3.9 percent," the report said.
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