Page 38 - bne IntelliNews George country report Sept 2017

ceiling at 'BB", the ratings agency said on September 30.
The Georgian economy has been weathering a storm of external pressures to post GDP growth in excess of 2.5% in 2015 and so far in 2016. A flexible exchange rate, strong growth in tourism and recovering remittances are contributing to the adjustment in the external sector, the ratings agency wrote in a report. Fitch anticipates economic growth to the tune of 3.2% in 2016 driven by high government spending, tourism and the beginning of works on an oil and gas pipeline project.
Nevertheless, the country has run high current account deficits (CAD). In 2016, the CAD is expect to amount to 11.9% of GDP, while the average in countries within the same ratings category is 2.4% of GDP. While Tbilisi has also attracted above-average foreign direct investment (FDI) of 9.8% of GDP in 2016, the CAD is pushing up the already high external debt. Georgia's foreign debt is forecast at 66.9% of GDP at end-2016, compared to an average of 15.7% in other BB-rated countries.
Meanwhile, the fiscal deficit is expected to be the highest since 2010 this year, at 4.4% of GDP, primarily due to high social payments during an election year. A corporate tax reform that will come in force in 2017 should stimulate medium-term growth, Fitch writes, predicting that it will also push the fiscal deficit up to 4.9% of GDP by end-2017.
Georgian banks, in the meantime, have weathered the depreciation well, with non-performing loans (NPLs) at a manageable rate of 3.9% of total loan portfolio at end-July. A year earlier, NPLs accounted for 3.2% of total lending. Banks are well capitalised and positioned to absorb a moderate deterioration in their loan portfolios, the ratings agency concludes.
8.4.1 International ratings - specific details of rating actions corp/regional etc
Fitch downgrades Georgian Railways to B+ with a stable outlook
Fitch affirms ratings of three mid-sized Georgian banks
Fitch Ratings on January 27 downgraded Georgian state-owned railway company Georgian Railways' long-term issuer default ratings (IDR) from 'BB-' with a negative outlook to 'B+' with a stable outlook. According to Fitch, the downgrade was prompted by a drop in railway transport volumes, which led to a 25% y/y contraction in the company's revenues and a 40% contraction in its EBITDA in the first nine months of 2016, respectively. The rating action was also informed by Georgian Railways' modest prospects for 2017-2019, as well as its moderate links with its indirect sole shareholder, the Georgian government, which is rated as 'BB-' with a stable outlook. The plans to privatise 25% of the company's shares is credit neutral, according to Fitch. Starting in 2014, rumours began circulating about the company going for a potential public listing, following in the footsteps of the London Stock Exchange-listed TBC Bank and Bank of Georgia.
Fitch Ratings has affirmed the viability (VR) and long-term issuer default ratings (IDR) of three mid-sized Georgian banks - Cartu Bank, Basisbank and Halyk Bank - the agency said on December 22. Fitch writes that the IDRs of Cartu and Basis banks, at 'B+' and 'B' respectively, are driven by their intrinsic strength, as reflected by their VRs of 'b+' and 'b', respectively. “The VRs reflect both banks' solid capital buffers (stronger at Cartu), good
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