Page 39 - GEORptMar20

S&P upgrades Georgia to BB/stable on improved economic resilience
gas pipeline project, but also due to a weak Turkish economy.
The recent termination of contracts to construct the Anaklia deep-sea port project on the Black Sea coast led Fitch to lower its FDI projections.
Fitch sees the political uncertainty as continuing in the run-up to October's parliamentary elections.
However, it does not expect a material diversion away from existing economic policy direction regardless of the election result. The extension of the IMF programme until April 2021 will help maintain policy credibility and the direction of structural reform through the electoral cycle.
The key rating weakness is seen as related to the country’s external position. The gross external financing requirement was equivalent to 70% of international reserves in 2019 and is set to rise in 2021 when a $500mn eurobond matures.
Georgia's current account deficit (CAD) in 2019 reached a historical low of 4.5% of GDP by Fitch estimates; largely on account of a smaller trade deficit as a result of weaker export growth and contraction in imports. The rating agency forecasts the CAD will reach 4.1% in 2020 and 4.2% in 2021, still significantly wider than the median 2.6% of BB category peers. Financing of the CAD is expected to be covered by sustained net inflows of FDI, averaging 5% of GDP.
S&P Global Ratings has​ ​raised​ ​its long-term foreign and local currency sovereign credit ratings on the Government of Georgia to BB while affirming the short-term ratings at B. The outlook is stable.
The rating agency said it expected Georgia’s economy to keep outperforming its peers in the region, but stressed that the floating exchange rate regime was important.
“Georgia's economy will continue to grow at a comparatively high 4% annually over 2019-2022. We expect it to grow faster than other countries in the region. Georgia's long-established floating exchange rate regime, with intermittent intervention from the central bank, remains particularly important,” the rating agency’s press release read.
Georgian finance minister Ivan Machavariani welcomed the upgrade. At a special news briefing on October 12 he said that the country needed just a couple of more upgrades to reach the rating which would "substantially change" the Georgian economy and its development. Indeed the action keeps Georgia’s sovereign long-term debt in the non-investment grade, speculative category.A two-notch upgrade is needed to bring it into the investment grade category.
S&P said that it could further improve the country’s rating if Georgia's growth rates translated into higher income levels while its exports profile diversified further, both in terms of product and geography.
The rating action comes in response to Georgia maintaining comparatively high growth rates over the past few years (4% on average over 2015-2018), even in a challenging external environment: the country’s trading partners were hit by falling oil prices, regional currencies were devalued, and some fell into recession.
39​ GEORGIA Country Report​ March 2020 ​​www.intellinews.com