Page 33 - GEORptDec17

8.4 International ratings
Georgia - Rating agency
as of September 2017
Bond rating: Moody’s
Ba2 (Stable)
Bond rating: Fitch
BB- (Stable)
Bond rating: S&P
BB- (Stable)
Fitch Ratings forecasts improved economic outlook as it affirms Georgia at BB-
S&P affirms Georgia at BB-, outlook stable
The agreement between the Georgian government and the International Monetary Fund (IMF) s igned earlier this year provides an anchor to macroeconomic policy and increases confidence in Tbilisi's reform efforts, ratings agency Fitch wrote in a report released on September 22.
In reaffirming the country's long-term foreign currency issuer default rating at 'BB-' with a stable outlook, Fitch noted that the resilience of the Georgian economy is being undermined by its external finances. Thus, the country's current account deficit stood at 13.5% of GDP in 2016, up from 12% in 2015, driven by a worsening of the primary income deficit. At 66% of GDP, Georgia's external debt is four times larger than those of similarly rated countries. Furthermore, the country's foreign exchange reserves are relatively low, covering only three months of imports.
The small and trade-dependent country has proven more resilient to the economic downturn in Russia and Central Asia in 2014-2016, posting average GDP growth of 4% in the last five years and managing to remain a competitive destination for foreign investment.
Furthermore, macroeconomic conditions are expected to improve in the short term, according to the report. The current account deficit is expected to fall to 11.3% of GDP in 2017 and 10.2% in 2019. After peaking at 7.1% y/y in June, consumer price inflation is expected to average 5.6% by the year-end and 3.5% in 2018 and the government budget deficit to narrow from 4.1% of GDP in 2016 to 3.9% in 2017 and 3.5% in 2018. And, after disappointing economic growth levels of 2.9% in 2015 and 2.2% in 2016, GDP growth is expected to pick up to 4.5% in 2017 (it stood at 4.9% in the first half-year) and to remain at that level in the next two years.
Standard& Poor's (S&P) anticipates that Georgian Dream-Democratic Georgia's (GDDG) victory in the October parliamentary election will not result in any significant policy changes, the ratings agency wrote in an analysis on November 11, in which it also reaffirmed the country's rating at 'BB-/B' with a stable outlook.
The S&P report came out the same week as a report by Moody's, which also reaffirmed the country's rating and said it was not expecting any major policy changes from a second GDDG administration. S&P elaborated by saying that the government was expected to maintain public finances in strong shape and to focus on economic growth, but that the landslide victory, which ensured a constitutional majority for GDDG of 115 seats out of 150 in parliament, could erode democratic checks and balances. The latter, however, is not S&P's baseline scenario, as Georgia has some of the strongest institutions in the region, the agency added.
33 GEORGIA Country Report December 2017 www.intellinews.com