Armenia's May 6 parliamentary election may have left less space for political checks and balances than desired, but it could lead to more financial cheques. While opposition parties cry fraud and observers frown at irregularities, the triumph of Armenian President Serzh Sargsyan’s ruling Republican Party of Armenia at the polls is a “credit positive” event for Armenia, according to Moody's Investor Service.
That the Sargsyan-loyal parliamentary majority has become even a larger majority will have a stabilizing effect on Armenia’s national creditworthiness, Bloomberg reported, citing Moody’s Investor Service.
The election outcome “will ensure a degree of political stability and policy continuity,” Moody’s analysts are quoted by Bloomberg as saying. And that policy has been to reduce government deficit and improve tax collection.
Yet Armenia's creditworthiness still carries a junk rating. The Ba2 grade on Moody’s list of naughty-and-nice countries (ranked by their ability to repay loans) means that lenders to Armenia run “significant” risk. Armenia has little external shock-absorption capacity thanks to its high dependence on the volatile Russian and EU markets, Moody’s wrote in November last year. Though Armenia has convalesced from its 2009 slump, Moody’s assessment for Armenia’s credit outlook has remained “negative” ever since.
Trade aspects aside, Armenia’s eternal feud with Azerbaijan over Nagorno-Karabakh enclave is also bad for credit. Same goes for Azerbaijan, but, thanks to its massive oil-and-gas wealth, Baku has little to worry about with its credit reputation. Moody’s recently upgraded by a notch the country’s rating to Baa3; ergo, acceptable ability to repay a short-term loan.
With a Ba3 rating, Georgia also does not fall into any of the star categories in Moody’s ratings, but its outlook is stable. A recent decision to sell a 25-percent stake in the state-owned railway monopoly was also a “credit positive” move by Georgia, according to the financial wonks.