Fitch: Armenia's foreign exchange reserves declining

International rating agency Fitch Ratings has affirmed Armenia's credit rating at BB- with a stable outlook, Caliber.Az reports, citing Armenian media.

The agency projects that Armenia's budget deficit will increase to 4.5% of GDP in 2024, up from 1.9% in 2023. This figure is notably higher than the average deficit of 2.6% observed in countries with a BB- rating.

Fitch also highlighted a decrease in Armenia's foreign exchange reserves. The reserves, which stood at $4.2 billion in August 2023, had dropped to $3.3 billion by June 2024. This amount is sufficient to cover external payments for approximately 2.8 months, compared to the average of 4.5 months for BB-rated countries.

The report noted that potential external shocks could affect the floating exchange rate of the Armenian dram. A decrease in currency inflows could lead to a weaker dram, raising the cost of imported goods but potentially boosting export competitiveness.