Fitch affirms Georgia at BB credit rating with “stable” financial outlook
Real GDP growth in Georgia is projected at 10.9 percent in 2022, the report said, adding “positive spillover effects on personal consumption, as well as stable export demand and continuing tourism recovery will help keep growth at 5.3 percent in 2023 and 4.7 percent in 2024.” Photo: Nino Alavidze/Agenda.ge
Tweet 
Share
Fitch Ratings, a global financial ratings firm, has affirmed Georgia’s Long-Term Foreign-Currency Issuer Default Rating status at a BB level, with a “stable” outlook for the country’s financial developments.
The international credit rating agency 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.
In an update on July 29, Fitch underscored the Russian invasion of Ukraine had so far been a “large positive economic shock” with up to 90,000 Russians, Belarusians and Ukrainians entering Georgia, resulting in a surge of remittances by 65 percent year-on-year in the first half of the year.
The global credit rating agency also noted that the increase in remittances would facilitate the decrease in the current account deficit to around 5.1 percent of the gross domestic product in Georgia in 2022, citing it would remain “well above the current BB median of 3.5 percent.”
The report also said foreign-exchange reserve coverage would average 4.5 months of current account payments in 2021-2024, noting a $280 million Stand-By Arrangement of the International Monetary Fund for Georgia was “positive for external liquidity risks,” adding although authorities were currently treating the deal as a “precautionary facility.”
Calling Georgia’s pre-pandemic record of fiscal discipline “strong”, the financial firm highlighted the country’s progress in revenue management and budgetary transparency of state-owned enterprises.
Fitch Ratings said the fiscal policy was “gradually tightening” amid “very strong” revenue growth and currency strength, and authorities intend to return to adherence to fiscal rules requiring deficits below 3 percent of GDP by 2023. Photo: Nino Alavidze/Agenda.ge.
There are some efforts at export-market diversification, with China emerging as the largest export market in January-May 2022,” the global financial agency added.
Fitch forecasted inflation in Georgia would average 11.5 percent year-on-year in 2022, adding housing and food prices would remain high in the country, before declining to 6.2 percent in 2023 and 4.2 percent in 2024.
Real GDP growth in Georgia is projected at 10.9 percent in 2022, the report said, adding “positive spillover effects on personal consumption, as well as stable export demand and continuing tourism recovery will help keep growth at 5.3 percent in 2023 and 4.7 percent in 2024.”
As for the geopolitical situation, the report pointed out Georgia was “highly exposed” to geopolitical risks, mentioning the unresolved conflicts involving Russia in Georgia’s occupied Abkhazia and South Ossetia (Tskhinvali region).
Authorities are implementing international sanctions on Russia, overseeing the change of ownership of one major Russian-owned bank and taking control of a large mineral water producer,” Fitch Ratings said.
Additionally, the report pointed out “political risks” in the country associated with upcoming parliamentary elections in 2024, calling the relations with Russia and the European Union “divisive issues.”
We see a risk that politics could weigh on progress in structural reform and the business environment over time,” Fitch said.
The Georgian economy grew by 7.2 percent in June and by 10.5 percent in the first six months of 2022 year-on-year, the latest data from the National Statistics Office of Georgia show.
Georgia received $427.4 million from abroad in June 2022, which is 111.7 percent more than the amount in June 2021, says the National Bank of Georgia.
The International Monetary Fund has approved a three-year $280 million Stand-By Arrangement for Georgia aimed at financial resilience and growth, the institution announced on Wednesday.
The Consumer Price Index in Georgia increased by 1.1 percent in May 2022 month-on-month, while the annual inflation rate equaled 13.3 percent, the National Statistics Office of Georgia announced on Friday.
Economic growth in Georgia is observed at a higher than expected level, a process contributing to the stabilisation of the share of the Government debt to the gross domestic product, Prime Minister Irakli Garibashvili said on Monday.
The National Bank of Georgia has decided to keep the refinancing rate unchanged at 11 percent following a meeting of its Monetary Policy Committee on Wednesday.
The Consumer Price Index in Georgia increased by 0.2 percent in July month-on-month, while the annual inflation rate totalled 11.5 percent, the National Statistics Office of Georgia announced on Wednesday.
Standard & Poor's Global Ratings has increased the economic growth forecast for Georgia from five to eight percent, revised its outlook from negative to stable and affirmed the country’s long- and short-term foreign and local currency sovereign credit ratings at 'BB/B', Prime Minister Irakli Garibashvili announced on Monday.