Chief Analyst of the Center for Analysis of Economic Reforms and Communication, Ph.D. in Economics Gunay Guliyeva commented on the last report on Armenia of the Moody’s International Rating Agency. She stated that Armenia's credit rating was maintained at Ba3 and the outlook remained stable.

For comparison, on April 06, 2021, Moody’s changed the outlook on Azerbaijan's rating to positive from stable and affirmed the long-term issuer and senior unsecured debt ratings at Ba2.

After the rapid spread of the Covid-19 pandemic and the Second Karabakh War, Armenia's economy encountered serious risks. According to the report, the most serious recession among sovereign countries in Asia and the Caucasus occurred in Armenia in 2020 with a 7.6 percent contraction in GDP. Armenia's budget deficit is more than 5% of GDP, government debt has risen from 50.1% in 2019 to 63.5% of GDP in 2020.

On the other hand, the vaccination process that is considered a key condition for economic recovery is weak in the country.

The report demonstrates negative risks for the country, new waves of coronavirus infection, and the impossibility of rapid recovery in the tourism sector, which has a significant share in GDP. As of the end of August, only 5% of the Armenian population had been vaccinated at least once, which could lead to an increase in the spread of infections in the future. Of course, all this is a serious threat for rationally thinking investors.  Since Armenia's credit ratings did not increase even in the post-conflict period, it indicates that international rating agencies are vague about the prospects for the economic development of the Armenian economy. According to the World Investment Report 2020, over the past six years, the amount of FDI invested in Armenia was only 1.6 billion US dollars (compared to 19 billion US dollars invested in Azerbaijan). Funds not invested in Armenia in the pre-conflict period cannot be invested in the post-conflict period when credit ratings have not improved.

Given that the major part of investments in the country are loans from international financial institutions and Armenia's total public debt is 63.5 percent of GDP, there would not be any financial institution with open and transparent financial statements to risk its funds. Excessive public debt could lead Armenia to default in the future. In the recent past, faced with dire consequences of a similar situation, Greece was selling its lands to foreigners. Today, Armenia has very limited resources to lease, not only land to sell to foreigners.

In this context, international financial institutions and separate organizations should conduct a comprehensive analysis of the current situation in the country before assisting Armenia, and only then think about risking their funds.

In the same report, Moody's emphasizes the importance for Armenian government to take policy to reduce this figure to 60% over the next five years. Of course, the rating agency does not expect a significant reduction in total debt - to - GDP in the short term.

On the other side, Moody's indicates a way out of this difficult situation for Armenia. The international rating agency sees the prospects for the development of the Armenian economy in resolving tensions with neighboring countries. The peace agreement with Azerbaijan, the demarcation and delimitation of borders, the opening of communication lines in the region, as well as the launch of the Zangazur corridor, which is very important for all countries in the region, are key conditions for Armenia's economic development.

Ensuring lasting peace in the region will accelerate new economic development as a result of re-integration between the countries of the region, the same as the economic development achieved as a result of reintegration will ensure lasting peace.