Fitch, a global credit rating agency, said on July 18, it had assigned a ‘BB-‘ rating to Georgia with “a stable outlook.”
Both President Saakashvili and Finance Minister Lexo Alexishvili have welcomed the rating, saying it was testimony to Georgia’s economic performance.
Fitch said the rating reflected a declining public debt burden, rapid GDP growth, an impressive record of structural reform, an increase in foreign direct investment inflows and strong international financial support, Thomson Financial reported.
Speaking at a government session on July 18, Finance Minister Alexishvili said the rating was an additional positive signal for potential foreign investors. He said it was an upgrade on previous ratings.
In December 2005, Standard and Poor’s, another credit rating agency, assigned ‘B+’ long-term and ‘B’ short-term sovereign credit ratings to Georgia with “a positive outlook.”
A year later, in November 2006, Standard and Poor’s, however, revised downwards its outlook on Georgia to ‘stable,’ owing to increased geopolitical risk, mainly involving tensions in its relationship with Russia.
The latest positive assessment was, according to Minister Alexishvili, due to “an impressive” growth in the economy and foreign direct investment.
He also said that the significant decrease in foreign debt was a factor. Georgia has completely repaid debts to Austria and China, and its debt to Turkmenistan, which was USD 393 million, now stands at USD 22 million. Alexishvili said foreign debt was now at a manageable 17% of GDP.
The minister said that the new sovereign rating meant that commercial banks in Georgia could now access funds at a more competitive rate on the international money markets. This, he said, would have a positive knock-on effect, with ordinary borrowers paying less in interest rates.
There was, however, a word of caution. Georgia’s moderate income level, large current account deficit and narrow economic base continued to constrain its rating, according to Fitch.
Georgia’s current account deficit deteriorated to around 20% of GDP this year, from 15% in 2006. The deficit, however, is expected to be off set by foreign direct investment and capital grants, Fitch added.
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