President Serzh Sargsyan was re-elected to a second five-year term with 58% of the votes after a campaign marked by one candidate’s attempted assassination. Mr Sargsyan’s victory reinforces his Republican Party, which gained the majority of seats during the May 2012 parliamentary election. Opposition leader  Raffi Hovannisian, who won 36% of the vote, has refused to admit defeat. Thousands already protested against re-election of Sargsyan. Nevertheless, protest are unlikely to reach the scale of the aftermath of the 2008 presidential election, which was characterised by deadly clashes between police and opposition supporters. International observers noticed that the election showed signs of improvement compared to previous ones but criticised the lack of competition as some of Sarksyan’s most prominent rivals did not run.

Impact on country risk

Protests are likely to continue in the coming months but are unlikely to undo the election outcome. Mr Sargsyan’s re-election paves the way for continuity. During his first term, some progress was made to reform tax administration and strengthen governance. Despite reforms, business climate remains poor. On the economic side, the country recovered from the crisis of 2008, when GDP slumped by more than 14%. In 2013, growth is expected to moderate to 4.3% from 6.2% in 2012. Despite having improved, the current account deficit remains large. Moreover, public debt has more than double between 2008 and 2012, albeit starting from a low level, external debt has surged to more than 70% of GDP in 2012 and external debt service has more than doubled. Foreign exchange reserves are adequate but remain under pressure. Hence, the MLT political risk is clearly deteriorating, which could prompt ONDD to downgrade its MLT political risk, currently in category 5, in the coming years. On the external side, the risk of armed conflict with Azerbaijan remains high as negotiations with Azerbaijan on the status of the Nargono- Karabakh region remain in a deadlock following the September 2012 decision of Azerbaijan to promote a soldier found guilty of the murder of an Armenian soldier.

Analyst: Pascaline della Faille, p.dellafaille@credendogroup.com