For weeks, anti-government protests have been calling for Prime Minister Nikol Pashinyan to resign. The army also asked for his resignation, a move which the PM decried as a coup attempt. The prime minister – still backed by his supporters who also took to the streets – is ready to organise snap elections under certain conditions and proposes to hold a referendum in October to adopt a new constitution that will give more power to the president.


Political tensions are rising following the six weeks of conflicts in Nagorno-Karabakh and the signing of a peace deal in November last year. The deal ended the heaviest fighting in the region since the 1990s, but also ceded part of the territory in and around Nagorno-Karabakh to Azerbaijan. This territory is internationally recognised as a part of Azerbaijan, but populated by ethnic Armenians. 

The ongoing protests are the largest since the prime minister came to power in a peaceful revolution known as the Velvet Revolution (2018). All this is happening in a very difficult economic context as the Armenian economy has been hit hard by Covid-19 and the Nagorno-Karabakh conflict. As a result of the double shock and despite very resilient remittances, real GDP is expected to have contracted by more than 7% last year. For this year, real GDP growth is expected to be subdued at about 1%.

In 2020, the gross public debt rose again after it had been in decline since 2018 thanks to fiscal consolation efforts. As a large part of public debt consists of external public debt denominated in foreign currency, this also put pressure on external debt. Unless both public debt and external debt are put on a clear downward trend, Credendo could envisage a downgrade of Armenia’s MLT political risk rating from its current category 6/7. Indeed, fiscal consolidation efforts are unlikely to be easy in the context of high political tensions and with the Covid-19 crisis still unfolding. On the positive side, the IMF Stand-By Arrangement (May 2019-May 2022) could serve as an anchor for fiscal consolidation in a country that has a good track record of implementing IMF programmes.

Analyst: Pascaline della Faille – p.dellafaille@credendo.com