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Moody's: Tension with Azerbaijan may worsen Armenian's economic situation

22 June 2023 17:04 (UTC +04:00)

Geopolitical risks have increased for Armenia over the past year, as the Russia-Ukraine war has led to a structural reshaping of Armenia's security architecture, it was stated in the forecast of "Moody's" international credit rating agency regarding Armenia, APA-Economics reports.

A diminished Russian regional presence over the past year have coincided with an increase in frequency and intensity of military clashes between Armenia and Azerbaijan over disputed regions. These skirmishes culminated to deadly clashes between the two countries in the second half of 2022. The frequency and intensity of the military tensions remain elevated.

Moody's views it unlikely that there will be a lasting resolution to the conflict between Armenia and Azerbaijan in the foreseeable future. Tensions between the two countries will remain high, but unlikely to escalate to full-scale hostilities. Increasing presence of the EU and the US in the region will likely contribute to keeping a full-scale conflict at bay. While not Moody's baseline, should geopolitical tensions develop to full-scale hostilities, it may spillover to domestic politics, severely crippling policymaking, weighing on Armenia's economic and fiscal prospects.