Fitch keeps Georgia at BB credit rating with “broadly stable” financial outlook

Fitch Ratings, a global financial ratings firm, has affirmed Georgia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) status with a BB rating, also calling the country’s financial developments “broadly stable”.

In an update on February 4, Fitch said Georgia’s rating was underpinned by “a credible and effective policy framework and stronger governance indicators” relative to peers with the BB rating, as placed on a spectrum from AAA to D rating assessments.

• National bank keeps refinancing rate unchanged at 10.5%

The report further notes “long-standing support from official creditors have helped reduced risks to macro stability and supported financing needs” in its evaluation of the country’s financial and credit status.

These credits strengths are balanced by significant exposure of public debt to foreign-currency risk, high financial dollarisation, and external finances that are significantly weaker than the majority of BB category rated peers,” the report reads. It also says “despite the pandemic shock, Georgian banks managed to increase their regulatory capital buffers.”

• Georgian economy up 10.6% in 2021

Fitch forecasts Georgia's economy to expand by 5.5 percent in 2022 and by 5.3 percent in 2023, additionally, projecting the recovery in the tourism sector of Georgia to pick up. It also says that credit growth in the country is “also robust, consistent with the acceleration in GDP.”

In 2021, the estimated real Gross Domestic Product (GDP) in Georgia increased by 10.6 percent compared to the previous year. 

• World Bank: Georgian economy to grow by 5.5% in 2022, 5% in 2023

However, Fitch says risks to its GDP outlook on Georgia “remain on the downside”, in addition to uncertainty due to the pandemic. The company notes “Georgia is currently experiencing a significant fourth wave of Covid-19 cases, while its vaccination rate remains low.” 

Fitch also expects the National Bank of Georgia to maintain a “tight policy stance for 2022,” forecasting average inflation of 7.0 percent in 2022. 

Fading out of high base effects should start to bring down inflation from the second quarter of 2022. However, the risk of high inflation expectations becoming entrenched is a vulnerability,” the firm said. 

• January 2022: annual inflation rate at 13.9%

As for fiscal policy, the international credit rating agency projects Georgia's general government fiscal deficit to narrow to 4.4 percent of GDP in 2022, after an estimated 6.1 percent of GDP in 2021. 

Georgia's pre-pandemic record of compliance with national fiscal rules should underpin fiscal policy over the medium term, and we expect a strategy of fiscal consolidation to resume once the pandemic shock subsides,” Fitch said. 

The report also underscores it doesn’t expect the polarised domestic politics to “infringe on Georgia's credible policy framework and relationship with official creditors.”