MINISTRY OF ECONOMY
AND SUSTAINABLE DEVELOPMENT
OF GEORGIA

Fitch Ratings has affirmed Georgia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable Outlook.

Keeping ratings unchanged in the context of the current situation in the region and global trade tensions is an important positive factor, further enhancing confidence of international institutions and investors in Georgia and positively impacting the country’s business environment.

According to the rating company report, the strongest factors in the rating are:

Dynamic tourism exports and lower import growth following the completion of large energy projects led to a narrowing of the current account deficit to 7,7% of GDP in 2018, from 8,8% in 2017. Fitch forecasts the current account deficit will narrow further to an average of 5,3% over 2019-2021 versus 3% for the current ‘BB’ median, as a slowdown in consumer lending and rising domestic savings following the launching of the funded pension pillar ease pressure on imports.

Net inflows of foreign direct investment (FDI) are forecast to cover the current account deficit each year. Net FDI is projected to average 5,9% of GDP over 2019-2021.

The upward trend in international reserves has a positive effect on the decline in foreign vulnerability. Reserves rose further and it is expected that they will reach 3,7 billion USD at end-2019.

Implementation of the government’s debt management strategy and the IMF program will help reduce public debt over the medium term.

Attractive business environment and quality of the governance are the strong parts of the Georgian economy.

The situation in the banking sector is also positive, driven by high levels of asset quality and capitalization in the banking sector. The dollarization trend continues to decline, and macro-prudential regulations will contribute to a gradual decline in dollarization over the long term.

The rating company also cites the challenges that the country faces today:

Russia’s sanctions on air travel between Georgia and Russia will limit tourism revenue growth. Against the backdrop of Russian sanctions, the ratings company slightly reduced its forecast for economic growth in 2019 to 4,3% (previous forecast - 4.6%), though it exceeds the median rate of BB category countries (3,3%). The increase in capital spending will help accelerate economic growth to 4,7% in 2020-2021.

Important factors, however, are situation in the conflict regions and the political uncertainty regarding the 2020 parliamentary elections.

According to the rating company, the constant rating is due to Georgia’s high quality of management, attractive investment and business environment and resilience to regional shocks. However, the rating company emphasizes that Georgia’s economic policy is supported by the IMF, which significantly increases confidence in the country’s economic policy.