Fitch Ratings: Armenia election signals policy continuity amid  lingering geopolitical risks

ArmInfo. Armenia's general election result signals broad policy continuity, possibly reinforcing the country's westward geopolitical trajectory and likely supporting further progress in the Armenia-Azerbaijan peace process, as stated in  Fitch Ratings report. However, the report emphasizes  that its  high exposure to Russia and its reliance on Russian energy remains a  significant economic vulnerability.

 Preliminary results showed incumbent Prime Minister Nikol Pashinyan's Civil Contract Party winning 49.8% of the vote, more than double that of the second-placed Strong Armenia Alliance. This could give Civil Contract 64 of 105 seats in the new National Assembly although the final seat allocation  will depend on confirmation of the results and whether the smallest  opposition party clears the 4% threshold for representation.  Civil  Contract's simple, albeit smaller, majority (it held 75 seats in the  previous National Assembly) should ensure policy continuity.  Pashinyan said the result would see Armenia "continue the course of  rapprochement with the west" while developing relations with Russia,  prioritising the Azerbaijan peace process and normalizing relations  with Turkiye.  However, Civil Contract will fall short of the  two-thirds majority required to unilaterally amend the constitution  in parliament. The removal of constitutional references to  Nagorno-Karabakh, a key Azerbaijani condition for finalizing a peace  treaty, remains uncertain, as it will require approval in a popular  referendum, which Pashinyan has previously indicated could be held in  2027.

  Armenia stands to benefit from the peace process and potential  normalization of relations with Turkiye, including the reopening of  the land border. This process began with a framework agreement in  August 2025 and continued with the TRIPP agreement signed on 4 June  this year, and would help integrate Armenia's landlocked economy into  a corridor connecting central Asia, the south Caucasus, Turkiye and  Europe.  This reorientation could unlock meaningful trade and transit  revenue, and could strengthen medium-term growth prospects. Growth  has moderated, partly due to the impact of the US-Iran conflict, but  remained resilient at 4.0% yoy in 1Q26, following 7.2% in 2025.  Inflation edged up to 5.3% in April before easing to 4.2% in May,  suggesting price pressures are broadly contained.  Economic risks  relate to Armenia's close links with Russia, which remains its  largest single trade partner, accounting for 35% of total goods  exports in 2025. Russia already imposed import restrictions on  selected Armenian food products in the lead-up to the elections and  has officially threatened to end Armenian purchases of Russian oil,  gas and rough diamonds free of export duties and on vastly  preferential terms if the country continues its path towards an EU  accession process.  

 Natural gas provides 61% of Armenia's energy needs and 85%-90% of  the country's natural gas imports come from Russia under a long-term  fixed-price contract. Unilateral termination of the preferential  agreement could materially increase energy costs and negatively  affect macroeconomic performance, as well as fiscal and external  balances.  In January of this year, Fitch noted lingering uncertainty  around the peace process when it revised Armenia's Outlook to  Positive and affirmed the 'BB-' sovereign rating in January. The  Outlook revision reflected Armenia's higher international reserves  and continued solid growth that will support fiscal consolidation  consistent with debt stabilization over the medium term.  Fitch's  next scheduled sovereign rating review is due on 10 July.  "It will  incorporate our assessment of the balance of geopolitical risks,  reflecting the prospects of successfully concluding the peace process  and progress towards greater integration with the west while  considering risks derived from relations with Russia." In the same  statement, Fitch outlines the sensitivity criteria for Armenia's  sovereign rating, which depend on such categories of factors as  structural factors, public finances, external finances, and  macroeconomics.

The following are considered positive triggers (for an upgrade):   structural- A sustainable decline in geopolitical risk and domestic  political uncertainty; for example, as a result of meaningful  progress in the peace process with Azerbaijan; public finances-  fiscal consolidation that supports a stabilization in general  government debt/GDP, while preserving improvements in terms of  currency composition; external finances; macro- Preservation of high  growth rates supporting a sustained increase in GDP per capita.

Negative triggers (for a downgrade) are considered to be: structural  factors— Developments that increase geopolitical risks and undermine  political and economic stability; for example, derailment of the  current peace process with Azerbaijan; public finances— Macroeconomic  or policy developments that steepen the upward path of general  government debt/GDP.and external finance— A reversal of improvements  in FX reserves that increases external vulnerabilities.

  Recall,  Fitch Ratings revised the outlook on Armenia's sovereign  credit rating from stable to positive in January 2026, while  affirming its long-term issuer default rating at 'BB-'. Alongside  this upgrade, the rating agency projected a robust and sustainable  economic growth trajectory for the country, forecasting GDP expansion  to exceed 5% annually through the 2026–2027 period.