Page 48 - GEORptJul22

8.4 International ratings
Georgia - Rating agency
as of May 2022
Bond rating: Moody’s
BA2 (Negative)
Bond rating: Fitch
BB (Negative)
Bond rating: S&P
BB (Negative)
Moody’s cuts Georgia’s credit rating outlook amid fears of Ukraine war spillover
S&P downgrades Georgia’s outlook to negative
Moody’s cut the outlook on Georgia’s sovereign 'BA2' credit rating to negative from stable on April 28, warning of risks linked to Russia’s invasion of Ukraine and Tbilisi’s own history of clashes with Moscow.
The rating agency said the decision to change Georgia’s outlook – which effectively puts it on a downgrade warning – reflected the “heightened geopolitical event risks” given Georgia’s “frozen” conflicts with Russia over South Ossetia and Abkhazia.
“While not Moody’s base case, a crystallisation of these political risks, including a possible expansion of the military conflict to Georgia and a consequent significant and sustained impact on Georgia’s economic and fiscal prospects, would weigh on its credit outlook,” Moody’s said.
Moscow recognised the breakaway regions of South Ossetia and Abkhazia as independent after fighting a war with Georgia in 2008. It stationed thousands of troops in both regions and has provided them with extensive financial support. The presence of Russian troops “increases the risk of the military conflict in Ukraine spilling over into Georgia”, Moody’s said.
S&P rating agency revised its outlook on Georgia to negative from stable, citing external balance issues and the volatile political situation impeding necessary reforms on February 26.
The negative outlook reflects risks to Georgia's ability to generate adequate foreign exchange earnings to service its sizeable external liabilities over the rating agency's forecast horizon, S&P said in its statement.
The rating would be lowered in case Georgia’s growth outlook deteriorates (which would endanger consolidation of the external and public deficits) or if the external gap’s financing further shifts to debt-generating rather than equity-based instruments.
“The recovery in the tourism sector is likely to lag the global rollout of vaccines, and we do not project a return to 2019 levels of tourist activity through 2024. Coupled with a more volatile domestic political and policy environment, this could cloud the medium-term outlook for foreign investment inflows — important for growth and external financing, in our view,” S&P analysts explained.
S&P projects Georgia's real GDP will grow by 4% in 2021 after contracting by 6% in 2020.
Economic activity, including in the beleaguered hospitality sector, will benefit from the relaxation of containment measures. Restrictions were reimposed after a sharp spike in COVID-19 cases in the last quarter of 2020. The continuation of some government support measures into 2021 should also
48 GEORGIA Country Report July 2022 www.intellinews.com