Baku, Azerbaijan, May 8
By Leman Zeynalova – Trend:
S&P Global Ratings affirmed its 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings on the government of Georgia. The outlook is stable.
“The affirmation reflects our expectation that our ratings on Georgia will continue to be supported by the country's relatively strong institutional arrangements and fiscal position, with net general government debt below 40 percent of GDP for 2017-2020,” said the report from S&P.
The ratings are primarily constrained by income levels--which remain low in a global comparison--and balance of payments vulnerabilities, including Georgia's import dependence, high current account deficits, and sizable external debt, according to the report.
“We also believe that the ratings remain constrained by the limited monetary policy flexibility, owing to Georgia's shallow domestic capital markets and high levels of dollarization,” said the rating agency’s analysts. “In our view, Georgia's economic policies and institutional arrangements remain among the strongest.”
S&P expects that the planned implementation of reforms, recent signature of free-trade agreements with the EU and China, and the strengthening of growth of Georgia's key trading partners (including Russia and Azerbaijan) should support economic acceleration.
“We expect headline growth of 3.5 percent this year, followed by gradual improvement toward a 5 percent growth rate in 2019,” said the report.
Other factors supporting growth in Georgia include strong investment dynamics expected over the next two years, underpinned by a number of public and private projects, including in the energy and tourism
sectors and recovering consumption supported by moderate inflation levels, more stable Georgian lari exchange rate, and domestic credit growth, according to the rating agency.
“At the same time, we expect Georgia's per capita income levels will remain modest throughout our four-year forecast horizon, largely reflecting the country's narrow economic base and the prevalence of exporting low value-added goods,” said the report.
Follow the author on Twitter: @Lyaman_Zeyn