Fitch Ratings has affirmed Georgia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Positive Outlook.
The rating is supported by Georgia's strong governance and economic development indicators relative to the 'BB' medians, its credible macro-fiscal policy framework, moderate level of public debt, and sound banking sector. These factors are balanced by high financial dollarisation and exposure of public debt to foreign-currency risk, and weaker external finances, including high net external debt and a large negative international investment position.
The Positive Outlook reflects very strong economic recovery combined with a fall in inflation and an improved external position. Macro-policy settings remain sound and Georgia's record of fiscal prudence helps underpin our expectation of low and stable general government deficits. Fitch also has greater confidence that migrant and capital inflows from Russia will not sharply reverse, although this remains a downside risk.
Real GDP grew 7.5% in 5M23, from an average 10.3% in 2021-2022, supported by positive spillovers from the war in Ukraine, notably in the transportation and information and communications technology sectors, as well as strong FDI, and recovery in tourism. Net inward migration from Russia, Ukraine and Belarus is estimated to have exceeded 100,000 in 2022 with only a modest fall this year. Fitch forecasts GDP growth to ease from 6.9% in 2023 to an average 5% in 2024-2025, as support from migration flows and external demand weaken. This is close to our assessment of Georgia's trend rate, and compares favourably with the projected 'BB' median of 3.1%.
