Fitch Ratings: Georgia's fiscal deficit to increase
BAKU, Azerbaijan, August 15
By Tamilla Mammadova – Trend:
Fitch Ratings forecasts Georgia's fiscal deficit to reach 9.2 percent of GDP in 2020 (compared with a forecast of 8.6 percent in April), Trend reports via the Fitch.
"Our wider deficit forecast relative to the government's 8.5 percent deficit target assumes both a weaker revenue projection and close to full absorption of most measures, although the take up of some support measures have so far been lower-than-expected. Fading of some one-off measures and economic recovery should help narrow the deficit to 4.8 percent in 2021," the report said.
Fitch estimates the accumulation of government deposits in Georgia to be around 5.6 percent of GDP. The government has an upcoming Eurobond redemption of $500 million in April 2021 (2.8 percent of GDP).
As forecasted,Georgia's general government debt-to-GDP ratio will increase to 58.5 percent in 2020, from 39.8 percent in 2019, before a modest decline to 56.9 percent in 2021.
"Our projections place Georgia's debt close to the projected median debt ratio (57.6 percent in 2021) of 'BB' category peers," Fitch said.
Fitch assumes the government will resume fiscal consolidation once the pandemic subsides due to Georgia's prudent track record and continued engagement with the IMF, currently through Extended Fund Facility (EFF).
"Georgia's high share of foreign-currency denominated debt gives rise to exchange rate risk. Increased fiscal risks are partially mitigated by a high share of multilateral debt, low interest costs and long maturities. Contingent liabilities remain a fiscal risk," the reports said.
As reported, the COVID-19 shock has increased vulnerabilities of Georgia's external finances.
Deteriorating external demand, a halt to inward tourism, and lower inflows of remittances are forecast by Fitch to more than double Georgia's current account deficit (CAD)-to-GDP from 5.3 percent in 2019 to 11.1 percent in 2020; higher than the projected 4.1 percent median CAD of 'BB' category peers.
Fitch expects external financing needs to be met by concessional official borrowing, which will help preserve external buffers. Net external debt-to-GDP will increase to 64 percent in 2020 from 60 percent in 2019, well above the projected 25 percent median of 'BB' category peers.
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