Fitch affirms Georgia at BB credit rating, revises financial outlook from “stable” to “positive”

Fitch Ratings, a global financial ratings firm, in its update on Friday, has affirmed Georgia’s Long-Term Foreign-Currency Issuer Default Rating status at a BB level, revising the financial outlook for the country’s financial developments from “stable” to “positive”.

The international credit rating agency said macroeconomic policy, implemented in the post-pandemic period, played a “decisive” role in improving Georgia’s outlook and noted it “partly” reflected “exceptionally strong” gross domestic product growth, with the economy expanded by an estimated 10.3% in 2022, following 10.4% growth in 2021, forecasting the moderate GDP growth to 4.5% in 2023.

Georgian economy grows 10.3% in January-August

A rise in international reserves by $0.6 billion to $4.9 billion in the year to end-December and fiscal outperformance in 2022 were also highlighted, calling Georgia’s fiscal discipline record “strong” and noting Georgia was “advancing reforms to improve the transparency and corporate governance of state-owned enterprises”.

The report said the reduction in public debt, which fell “greatly-than-expected” in 2022 by 9.3pp to 40.1% of GDP, returning to its pre-pandemic level, has also played an important role in improving the country's outlook and predicted public debt to stabilise in 2023-2024 at 39.7%, below the projected 'BB' median of 55.0%. 

Fitch forecasted inflation in Georgia would decline to 5.2 percent in 2023 and 3.9 percent in 2024.

May 2022: annual inflation rate at 13.3%

As in previous evaluations, the agency considers the rating was supported by Georgia's “strong governance” and economic development indicators relative to the 'BB' medians and by its “credible” macroeconomic and fiscal policy. The “significant” exposure of public debt to foreign-currency risk, high financial dollarisation, and weaker external finances were named as the rating weaknesses.

As for the geopolitical situation, the report pointed out Georgia was exposed to geopolitical risks, mentioning ​​the unresolved conflicts involving Russia in Georgia’s occupied Abkhazia and South Ossetia (Tskhinvali region).

Additionally, the report mentioned the “political risks” in the country associated with the upcoming parliamentary elections in 2024, which would “likely require coalition support, potentially involving challenging political negotiations”. Fitch added that while this could result in “somewhat greater political instability and uncertainty”, it did not anticipate “any marked change” in macro-fiscal policy settings.