Armenia–Azerbaijan ties lift economic outlook, Fitch says

Fitch Ratings, one of the world’s three major credit rating agencies, says the start of trade and economic relations between Armenia and Azerbaijan could improve Armenia’s economic prospects, citing reduced geopolitical risks following recent steps towards peace.

In its latest rating commentary, Fitch said a joint declaration aimed at reaching a peace agreement had significantly lowered the risk of renewed military escalation in the near term, although it cautioned that a final accord remained uncertain.

The agency noted that concluding a comprehensive peace deal would require constitutional changes in Armenia to remove references to Karabakh, a process that would need approval through a national referendum likely to take place after parliamentary elections in June.

“Trade with and through Azerbaijan has begun to open up,” Fitch said, adding that relations with Türkiye were also improving.

The agency said the Turkish government was reportedly considering reopening its land border with Armenia, which could further support trade and investment.

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Against this backdrop, Fitch revised Armenia’s Long-Term Foreign-Currency Issuer Default Rating outlook to Positive from Stable, while affirming the rating at BB-.

Credit rating outlooks are closely watched by international investors as they can influence a country’s borrowing costs and access to global financial markets.

The ratings agency said Armenia’s general government deficit for 2025 was estimated at 5.0% of gross domestic product, below the budgeted level but still higher than the median for countries with similar credit ratings.

It added that the government’s 2026 budget targeted a narrower deficit, partly due to lower defence spending and higher health expenditure linked to the phased introduction of universal health insurance.

Fitch said it expected the government to meet its 2026 fiscal target, though it forecast wider deficits from 2027 onwards compared with the authorities’ medium-term goals.

The agency also noted a gradual decline in dollarisation, with foreign-currency deposits falling to about 43% in late 2025, supported by regulatory measures and growing confidence in Armenia’s national currency.

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