Page 36 - GEORptApr21

Georgia's public debt overview
report, in which it downgraded Georgia’s sovereign outlook to negative.
The ratings agency projected that the current account deficit would widen further to nearly 13% of GDP in 2021, before narrowing through 2024 as exports recover. However, under its projections, current account receipts would not reach 2019 levels (5.5% of GDP, compared to 12.2% of GDP in 2020), even in 2024.
On the upside, S&P considered that Georgia was less vulnerable to shifts in investor sentiment towards emerging markets than several peers, given the small proportion of market-based portfolio financing it receives relative to foreign direct investment (FDI) and concessional debt owed to international financial institutions (IFIs).
However, with a less certain environment for investment inflows, it projected that external financing was more likely to be forthcoming via debt-creating inflows than FDI through the forecast horizon.
Georgia’s public debt metrics deteriorated more than envisaged during the 2020. Due to the economic decline in 2020-2021, tax revenues collapsed and the budget deficit increased to 9.1% of GDP in 2020 (from 1.8% of GDP in 2019), and it is not going to decrease to anywhere below 7.6% in 2021 according to Minister of Finance Ivane Machavariani.
The government debt, which also increased along with the expanded budget deficit, is set to go beyond the 60% margin in 2021. In this context, it is relevant to mention that the government is planning to roll over its $500mn eurobond in 2021, to preserve international reserves. Repaying the eurobond from government deposits rather than refinancing it would reduce the 2021 debt ratio by 2.8pp of GDP.
The largest creditors of the state of Georgia are Asian Development Bank (ADB), World Bank International Development Association (IDA), European Investment Bank (EIB) and International Bank for Reconstruction and Development (IBRD).
The debt owed to IDA is GEL2.85bn ($935mn), the ADB debt stands at GEL4.36bn ($1.43bn) and the EIB debt is GEL1.88bn ($620mn). Gross external debt include both public sector (general government, public corporations and national bank) and private sector (banking and other sectors)
36 GEORGIA Country Report April 2021 www.intellinews.com