Fitch Ratings affirms Georgia at 'BB-', outlook positive

Fitch Ratings has assessed Georgia’s Issuer Default Ratings (IDR) at 'BB-'. The outlook is positive, Fitch added.

“Georgia's ratings are supported by governance and business environment indicators that are above the current medians of 'BB' category peers, and a track record of macroeconomic resilience against regional shocks. Confidence in the authorities' economic strategy is also anchored by an IMF Extended Fund Facility (EFF) programme. Georgia's external finances remain significantly weaker than the majority of 'BB' category peers,” Fitch said in a statement.

“The positive outlook on Georgia's rating reflects favourable growth prospects and a steady improvement in the public finances. However, escalating negative developments in Turkey and risk of further US sanctions against Russia represent downside risks to Georgia's economic outlook. Russia and Turkey are Georgia's second- and third-largest trading partners, accounting for 14.5% and 7.9% of total exports in 2017, respectively. Both countries are also important sources of remittances, foreign direct investment (FDI), and tourism revenues.

“So far Georgia's economy has been resilient against recent regional volatility. Estimates from national statistics (GeoStat) show the economy to have grown 6% in real terms year-on-year (yoy) in 1H18, above Fitch's expectations. Growth was broad-based; led by domestic demand through a strong pick-up in investment activity and robust export growth. Fitch projects real GDP growth to average 4.8% in 2019-2020, compared with 3.5% across 'BB' category sovereigns. Risks are on the downside due to the less favourable external environment.

“Georgia's public finances continue to improve. The cyclical upturn has helped boost tax revenue growth, while expenditures remain contained on the back of government priorities to reduce current expenditure in order to meet capital spending needs. For 2018 and 2019, Fitch is forecasting Georgia's general government fiscal deficit to average 2.6% of GDP, down from 2.9% of GDP in 2017, and in line with the projected median deficit of 'BB' peers,” the agency added.