Azernews.Az

Moody's Investors Service lowered its outlook on Armenia's junk-territory sovereign ratings to negative from stable, pointing to risks to the country's growth given the anticipated economic slowdown in Europe and Russia, Wall Streat Journal reported.

The ratings firm, which sees Armenia's government foreign and local currency issuer ratings two notches into junk territory at Ba2, noted Europe and Russia account for 58% of Armenia's export market. In particular, Armenia's reliance on exports to Russia poses risks to the country's external position.

Moody's also said potentially lower commodity prices could further impact the Armenian economy, as exports are concentrated in its mining and metals industries. The outlook downgrade also reflects concerns on the risk to Armenia's shock-absorption capacity as it enters another economically challenging period with weakened debt metrics and a more vulnerable external position. The firm noted Armenia is now faced with a large current account deficit and has seen its total debt burden more than double in the last three years.

However, Moody's noted the government is committed to fiscal consolidation, with measures in a draft 2012 budget that are aimed at reducing the general government deficit to 3.1% of GDP next year, as well as efforts to improve the efficiency of tax collection. The impact of such measures will remain unclear for some time and implementation risks to the fiscal consolidation plan are significant, Moody's added.