Georgia's official reserves grow to $3.3B

Business Materials 18 August 2019 10:25 (UTC +04:00)

Baku, Azerbaijan, August 18

By Tamilla Mammadova – Trend:

Official reserves of Georgia rose to $3.3 billion at end of 2018 as FX reserve requirements increased and the National Bank of Georgia (NBG) pursued its reserve accumulation policy while remaining committed to a floating exchange rate, Trend reports via the web-site of Fitch Agency.

Reserves rose further over 1H2019 and Fitch expects they will reach $3.7 billion at end-2019 (3.3 months of current account payments), although accumulation may be hampered by subdued tourism earnings and possible further FX intervention by the NBG to curb exchange rate volatility.

External vulnerabilities remain a key rating weakness but are gradually easing. The gross external financing requirement accounts for 87.4 percent of international reserves and is set to rise in 2021 when the $500 million Eurobond matures. The liquidity ratio of Georgia is at 102 percent.

"We forecast gross external debt (GXD) to decline below 100 percent of GDP by 2021 due to sustained FDI inflows and a narrowing current account deficit; intra-company loans, which carry limited refinancing risks, accounted for an estimated 19 percent of GXD at end-2018", said the Rating Agency.

Fitch forecasts economic growth of Georgia to decelerate to 4.3 percent in 2019, from 4.7 percent in 2018, as credit growth slows down and the Russian flight ban hinders expansion of the tourism sector. Nonetheless, acceleration of infrastructure spending and slightly looser fiscal policy will support a pick-up in growth to an average 4.7 percent in 2020-2021.