S&P Global Ratings announced a change in Armenia’s sovereign outlook on Thursday, raising it from stable to positive while maintaining the country’s long- and short-term foreign and local currency ratings at 'BB-/B'.
The ratings agency attributed the outlook revision to potential improvements in regional geopolitical and security dynamics, most notably continued steps toward normalizing diplomatic and trade relations between Armenia and Azerbaijan. S&P also cited Armenia’s favorable growth prospects and the cushioning effect of higher international reserves held by the Central Bank of Armenia alongside a flexible exchange rate as factors that should reduce vulnerability to unexpected external shocks.
S&P’s macro projections show real gross domestic product expanding by 5.3% in the current year and by 4.8% in 2027. Over 2022-2025, Armenia’s growth averaged 7.8% - a pace S&P characterizes as among the fastest of the 143 sovereigns it rates.
The ratings firm noted progress in peace negotiations between Armenia and Azerbaijan, saying that these developments have lowered the near-term probability of further military escalation. S&P flagged the August 2025 U.S.-brokered agreement as an important political milestone that demonstrated leadership-level commitment and contributed to stabilizing the security environment.
On public finances, S&P projects the fiscal deficit to average about 3.3% of GDP over 2026-2029. For 2026 specifically, the firm forecasts the general government deficit at 4.2% of GDP, which it observes is below the government’s official target of roughly 4.5% of GDP. S&P expects general government debt, net of liquid assets, to remain broadly stable at a moderate 44% of GDP over the medium term.
The Central Bank of Armenia’s international reserves rose materially in 2025, with gross international reserves reaching a record $5.2 billion in January, up from about $3.3 billion a year earlier. In the financial sector, S&P described the banking system as well capitalized and highly profitable, supported by strong net interest income. The firm also highlighted that the rate of credit growth is running above 20% year-on-year.
While S&P left Armenia’s sovereign ratings unchanged at 'BB-/B', the agency’s forward-looking shift to a positive outlook underscores the interplay between geopolitical normalization, macroeconomic performance and balance-sheet strength in its assessment of sovereign creditworthiness.