Page 50 - Small Stans and Causcasus Outlook 2022

$37.7mn on interest payments.

4.4 Budget and debt - Georgia

As opposed to its fragile external position, Georgia’s public finance
balances are rather robust despite the temporary surge in the public
deficit in 2020 (to 9.3% of GDP) caused by supplementary expenditures
and shrinking revenues caused by the COVID-19 crisis. Massive
foreign financing, largely provided by bilateral institutions, pushed up
the public debt (to 60% of GDP at end-2020) at the same time.

Economic normalisation, hopefully starting in 2022, will bring the public
debt and the budget deficit down to the sustainable levels before the
crisis. Georgia’s public deficit was only 2.7% of GDP in 2019 (and 0.7%
of GDP in 2018) and the government plans to bring it down under 3% of
GDP by 2023 again. At that time, the public debt to GDP ratio is
projected at 50% – some 10pp up from the 40% ratio prevailing before
the crisis.

Fitch forecasts Georgia's government debt ratio to have peaked in 2020
at 60% of GDP, declining to 56.0% in 2021 and to 55.2% in 2023,
versus 50.2% projected by the government). The rating agency
grounds its forecast on the economic recovery, rolling off of COVID-19
support measures, and the use of accumulated government deposits
(8.6% of GDP at end 2020, up from 4.7% of GDP at end-2019, Fitch
estimates).

Debt sustainability is supported by a large share of multilateral and
bilateral debt (approximately 72% of total debt) with long average
maturities and low interest costs, which helps mitigate risks stemming
from foreign-currency denominated debt (81.4% of total debt, 2020).

After a fiscal deficit of 9.3% of GDP in 2020, Fitch forecasts deficits of
6.8% in 2021 (in line with government’s target), and 5.1% in 2022
(compared with 4.3% planned by the government) and 3.3% in 2023
(2.8% intended by the government). Narrowing of the deficit will come
from the rolling-off of around 2.5% of GDP in COVID-19 support in
2022-2023, and lower public investment spending in 2023.

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