S&P Global Ratings affirmed Armenia’s BB-/B long- and short-term foreign and local currency sovereign credit ratings and kept the outlook on the long-term ratings positive, while cutting its forecast for Armenia’s 2026 real GDP growth to 4.9 percent from 7.1 percent in 2025.
The 4.9 percent figure is a downgrade from the 5.3 percent S&P projected for Armenia in February. The agency attributed the slowdown partly to weaker consumption and export performance following Russia’s restrictions on selected Armenian goods.
Russia has progressively tightened those restrictions since the spring, starting with selected mineral water and alcoholic beverages and expanding to flowers, fish products and a wide range of fresh fruit and vegetables. S&P puts the exports caught by the bans at roughly 2 percent of GDP.
Russia accounts for between 80 and 98 percent of the various product categories affected.
Agricultural supplies move during the summer and fall harvest, so S&P expects the effect to intensify in the second half of 2026, pressuring agricultural output, rural incomes and export revenues.
The list of restricted goods has grown since it began, citing violations of phytosanitary requirements, to cover vegetables, fruits, berries, grapes, potatoes, dried fruits, live fish and fish products, and dairy products as of July 27. Russia also banned the transit of Armenian-origin products through its territory to other EAEU countries.
Armenia’s Central Bank has estimated the damage separately. Vazgen Poghosyan, head of the bank’s monetary policy department, said on August 10 that the impact of the Russian measures could reach 1 to 1.5 percent of GDP.
Exporters are likely to redirect some trade flows toward alternative markets including the EU, S&P said, but the agency treated the episode as evidence of Armenia’s continued dependence on the Russian market and the vulnerability of certain export sectors to bilateral trade disruptions. Producer support and diversification efforts only partly offset the short-term hit, and S&P named the risk of further trade restrictions as a negative factor in its baseline scenario.
Gross foreign currency reserves reached a record $6.9 billion in June, up 46 percent from the same period last year, on government Eurobond issuance, central bank foreign currency purchases and inflows of financial and capital funds from abroad. S&P expects them to stay broadly stable.
Armenia’s external position has improved over several years on a gradually appreciating currency, stronger buffers and higher current account receipts, according to the agency. Narrow net external debt as a share of current account receipts has fallen from almost 109 percent in 2020 to about 50 percent in 2025.
S&P forecasts the current account deficit will narrow to 8.0 percent of GDP in 2026 from 8.7 percent in 2025, citing softer domestic demand and resilient services exports, particularly tourism and ICT.
Tourist arrivals rose almost 15 percent in the first half of 2026. Russia accounted for 40 percent of arrivals, Georgia 15 percent and Iran 8 percent. Better air connections, competitive pricing and continued development of the sector should keep tourism revenues strong, S&P said, and over the medium term the agency expects the current account deficit to fall toward 6 percent of GDP as domestic demand normalizes, export diversification progresses and tourism revenues grow.
The general government fiscal deficit should narrow to about 4.2 percent of GDP in 2026, below the official budget target of 4.5 percent.
S&P also named the proposed Trump Route for International Peace and Prosperity as a possible boost to regional connectivity, trade and investment over the medium term, while noting that implementation is at an early stage with project areas, financing and concession terms still to be finalized.
The positive outlook reflects the potential for Armenia to build a track record of external resilience through sustained buffers and continued progress toward normalizing relations with Azerbaijan. S&P said it could revise the outlook to stable if regional geopolitical risks escalate markedly or if labor and capital inflows from Russia sharply reverse. A ratings upgrade would require the balance of payments to keep holding up against security and geopolitical risks, supported by further reserve accumulation and further progress with Azerbaijan.
S&P expects average annual growth of 5 percent across 2027 to 2029, driven by consumption and investment.
Armenia’s 2026 state budget projects growth of 5.4 percent. The Central Bank’s second-quarter monetary policy report puts full-year GDP growth at 4.5 to 4.1 percent depending on the scenario.
Among international institutions forecasting Armenian growth for 2026, S&P’s 4.9 percent now sits at the bottom of the range. Fitch Ratings projects 5.2 percent, the IMF 5.25 percent, the World Bank 5.3 percent, the Asian Development Bank and the EBRD 5.5 percent each, and the Eurasian Development Bank 6 percent.
