Fitch Affirms Georgia at 'BB-'; Outlook Stable

Fitch Ratings has affirmed Georgia's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'BB-' and maintained the 'Stable' outlook, saying that the upside and downside risks to the rating are currently well balanced.

The agency also confirmed Georgia's senior unsecured foreign and local currency bonds with a 'BB-' Rating. The Country Debt Ceiling has been affirmed at 'BB'.

The firm said that the completion of the electoral cycle has demonstrated that Georgia's institutions can channel political change, but the political scene is still relatively fragmented.

Fitch forecasts that Georgia's public and private investment will pick-up in 2014, supporting an acceleration of GDP growth to 5 percent, which is closer to the average for 2010-12.

The current account deficit, which eased in recent months on the back of improvement in exports, is expected to rise in 2014-15. The fiscal deficit is estimated to have shrunk to 2.4 percent of GDP this year.

Meanwhile, Fitch warned that a renewed widening of the current account deficit, combined with a fall in capital inflows could lead to a weakening in the exchange rate, posing a risk to the current rating.

Referring to Russia-Georgia relations, Fitch says that the new government has significantly improved bilateral relations with Russia and allowed for the opening of the Russian market after a ban was imposed in 2006. As a result, exports to Russia increased from 2Q13.

Fitch expects exports to Russia to continue to grow in 2014-15.