NEW YORK — Moody’s Investors Service has downgraded Armenia’s issuer and government bond rating to Ba3 from Ba2, and changed the outlook to negative from stable.

The key drivers for the downgrade are the following:

1) Armenia’s increased external vulnerability due to declining remittances from Russia, an uncertain outlook for foreign direct investment (FDI), an elevated susceptibility to exchange rate volatility, and expected pressure on foreign exchange (FX) reserves;

2) The country’s impaired growth outlook, compounded by negative growth spillovers from Russia, weak investment activity, and constraints on trade with countries outside the Eurasian Economic Union (EEU) that are expected from Armenia’s recent EEU accession.

In a related action, Moody’s has also lowered the local-currency bond and deposit ceilings to Ba1 from Baa3, the foreign-currency bond ceiling to Ba2 from Ba1, as well as the foreign-currency deposit ceiling to B1 from Ba3. The short-term foreign-currency bond ceiling and the foreign-currency deposit ceiling remain at NP.

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