Standard & Poor’s confirms Georgia at ‘BB/B’ with negative outlook

  • S&P says the negative outlook reflects risks to Georgia's ability to generate adequate foreign exchange earnings to service its sizable external liabilities over our forecast horizon. Photo: Nino Alavidze/, 27 Feb 2021 - 13:51, Tbilisi,Georgia

Standard & Poor's (S&P) Global Ratings has affirmed Georgia’s long- and short-term foreign and local currency sovereign credit ratings at 'BB/B'. S&P has meanwhile revised its outlook from stable to negative.  

S&P reported on February 26 that ‘the COVID-19 pandemic's fallout for Georgia's export performance' has been larger than they anticipated, with 'tourism receipts unlikely to return to 2019 levels over the next four years’. 

Moreover, it said that ‘foreign investment inflows - an important growth driver in the pre-pandemic era - face risks from a weaker external environment and domestic political considerations’.

The negative outlook reflects risks to Georgia's ability to generate adequate foreign exchange (FX) earnings to service its sizable external liabilities over our forecast horizon. The recovery in the tourism sector is likely to lag the global rollout of vaccines, and we do not project a return to 2019 levels of tourist activity through 2024.”, the report reads.

If further notes that ‘coupled with a more volatile domestic political and policy environment, this could cloud the medium-term outlook for foreign investment inflows - important for growth and external financing, in our view’.

Opposition politicians and their supporters have set up 11 tents in front of the parliament building in Tbilisi demanding repeat parliamentary elections be held and political prisoners - released. Photo: Nino Alavidze/

S&P said they could lower the ratings over the next year if: 

  1. They believed economic growth prospects would be materially weaker for longer, endangering the consolidation of Georgia's fiscal and external finances or 
  2. Financing for Georgia's twin deficits continued to reorient toward debt-creating foreign flows, rather than equity-like flows.

It could also 'revise the outlook back to stable if FX earnings recover faster than we anticipate, fostering a reduction of external imbalances'.

The ratings are supported by Georgia's relatively strong institutional arrangements when compared regionally; its floating exchange rate regime; and the availability of timely, concessional financing from international financial institutions (IFIs) under extenuating circumstances", S&P said.

S&P projects Georgia's real GDP will grow by 4% in 2021 after contracting by 6% in 2020. Economic activity, 'including in the beleaguered hospitality sector, will benefit from the relaxation of containment measures'.

Opposition United National Movement chair Nika Melia, who is charged with incitement to violence during the June protests in Tbilisi back in 2019, has been arrested for refusal to post bail. Photo: IPN

Noting that 'risks to Georgia's growth arise from a weak recovery for tourism, slow rollout of vaccines, and diminished foreign investment inflows', the report says 'frequent political crises risk denting reform momentum, and foreign investor perception of Georgia's stability'. 

Unresolved political tensions between the ruling party - Georgian Dream - and the opposition might weaken reform momentum and risk hurting foreign investors' perception of Georgia's stability amid risks of power centralization", the report also reads.

S&P thinks that although 'opposition's demand for fresh elections is unlikely to be met, there is room for other political concessions that could end the deadlock'.

Former prime minister Giorgi Gakharia's recent resignation over the sentencing of an opposition leader further clouds near-term policy predictability, though the government's stated macroeconomic agenda remains unchanged", it stated.

Standard & Poor's first raised Georgia's long-term foreign and local currency sovereign credit ratings to 'BB' from ‘BB-’ in October, 2019. It later affirmed the rtaings in August, 2020.

Recently Global Fitch has also confirmed Georgia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BB’ with a negative outlook.