Page 34 - GEORptDec17

S&P forecasts economic growth to the tune of 2.8% in 2016, which will gradually increase over the coming years up to 5% in 2019. The factors supporting this optimistic forecast are the robust investment anticipated to come on line in the next two years, underpinned by a number of public and private projects in energy and tourism; strong consumption performance supported by moderate inflation levels; and a strengthening export performance starting in 2017 on the back of government efforts to diversify exports and an economic recovery in Russia and Azerbaijan, important trade partners of Georgia's.
The agency added that government debt is expected to inflate to 3.5% of GDP in 2017-2019, in part due to the depreciation of the Georgian lari and the high level of dollarisation of Georgia's external debt. External government debt is expected to peak at 43% of GDP in 2018. Georgia's weak external position remains one of the main constraints on its rating, as the current account deficit has continued to grow, reaching a four-year high of 12% of GDP in 2015.
8.4.1 International ratings - specific details of rating actions corp/regional etc
Moody’s upgrades Georgia’s TBC and Bank of Georgia
Moody's Investors Service on September 13 upgraded JSC Bank of Georgia (BoG) and TBC Bank's local-currency deposit ratings to Ba2 from Ba3 and their foreign-currency deposit ratings to Ba3 from B1. The move followed a September 11 upgrade of Georgia's sovereign rating to Ba2.
The rating action “reflects the rating agency's view that the government's improved creditworthiness enhances its capacity to provide support to the two banks, in case of need”, Moody’s said.
BoG's senior unsecured foreign-currency debt rating was also upgraded to Ba2 from Ba3. The ratings for both banks continue to carry a stable outlook.
The banks' short-term deposit ratings were affirmed at Not Prime and their Counterparty Risk Assessments (CR Assessment) were affirmed at Ba2(cr)/Not Prime(cr). Their standalone Baseline Credit Assessments (BCA) and adjusted BCAs of ba3 are unaffected by this action.
“Moody's high support assessment for the two banks derives from their systemic importance to the national economy and the functioning of the domestic financial system and despite constraints on the government's financial flexibility to provide support to failing institutions because of the high degree of dollarisation in the economy: BoG's and TBC Bank's shares of client deposits in Georgia were 32% and 40% respectively as of end-June 2017; their market shares of gross loans were 32% and 38% respectively at the same date," the statement said.
Moody's said it continues to assess Georgia's Macro Profile (operating environment for banks) as Weak+. Therefore, Georgian banks' standalone BCAs were unaffected by the upgrade of the sovereign rating.
“The rating agency's assessment incorporates the funding challenges posed by the large quantity of foreign-currency deposits, that account for two-thirds of total deposits (mostly US dollars) and a material amount of non-resident
34 GEORGIA Country Report December 2017 www.intellinews.com