Political or geopolitical developments that accentuate external vulnerabilities and policy weaknesses in the southern Caucasus region are highly pertinent to the sovereign credit profiles of Georgia (BB/Negative),
A sharp rise in political risks in Georgia, accompanied by a weakening of the country’s international reserves position, contributed to Fitch’s revision in December 2024 of the Outlook to Negative from Stable. Balance-of-payment flows, notably FDI, and the policy responses will be key to building reserves.
As with Georgia, a weakening of the currency would pose risks to debt dynamics, given high FX-denominated public debt.
In Georgia, political tensions have had no material impact on consumer confidence or banks’ profitability. The sector benefits from robust economic activity, still relatively high interest rates and improving asset quality.
