Georgia, Tbilisi, March 4 / Trend N.Kirtzkhalia /
Fitch Ratings has revised the outlook on Georgia's Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) to Positive from Stable and affirmed them at B+. The agency has also affirmed Georgia's Short-Term IDR at B and Country Ceiling at BB-, the agency reported.
The Georgian economy is recovering strongly, benefiting from the global economic recovery, large-scale international donor financing and an apparent improvement in trade performance. Fitch estimates real GDP growth of 6.5 percent in 2010, after a contraction of 3.9 percent in 2009. The agency projects relatively strong GDP growth will continue, with 5.0 percent and 6.0 percent forecast for 2011 and 2012, respectively, the Georgian Finance Ministry reported, citing the agency's report.
The stronger macroeconomic backdrop should help to support continued fiscal consolidation. The programmed budget deficit target was achieved in 2010, coming in at 6.6 percent of GDP, down from a 9.2 percent shortfall in 2009. The government plans to reduce the deficit further to 3.9 percent in 2011 and 3.1 percent in 2012, driven by reductions in expenditure as a percentage of GDP. Fitch views this as achievable, but sees some downside risks to the implementation, given the government's short track record of fiscal consolidation (the deficit widened every year between 2005 and 2009).
Political risk in Georgia appears to have eased somewhat over the past half and a year, although Fitch still views it as relatively high. Relations with Russia remain difficult, but the agency does not expect a resumption of military conflict in the foreseeable future.
Fitch may raise the ratings of Georgia if the country significantly reduces the budget deficit and stabilizes the public debt-GDP ratio. In contrast, the ratings could be lowered if Georgia does not holds activities to consolidate the budget and, consequently, will not be reduced its deficit. In addition, lower ratings may be due to the deteriorating economic growth and trade in the country.