BAKU, Azerbaijan, April 15
Tamilla Mammadova – Trend:
Moody's Investors Service has assigned a rating of Ba2 to the proposed senior unsecured, USD-denominated bonds to be issued by the Government of Georgia, Trend reports via the Moody.
The ratings mirror Georgia's issuer rating of Ba2 with a stable outlook.
Georgia's (Ba2 stable) credit profile is underpinned by the strength of its institutions, which have fostered economic resilience and underpinned the country's track record of robust economic growth. These strengths are balanced against its small, low income economy, while banking sector and external vulnerability risks continue to constrain the rating. The open nature of Georgia's economy, with tourism and financial inflows as key drivers of growth, has amplified the severe impact of the coronavirus pandemic on its economy and balance of payments position.
Moody's assessment of Georgia's economic strength reflects its significant demographic challenges - stemming from its aging, shrinking population - and persistently low productivity growth in its agricultural sector, which employs around half the country's population but accounts for a declining share of national output. Georgia's overall real GDP growth rate is relatively high when abstracting from the current negative impact of the coronavirus outbreak.
Moody estimates that Georgia's economic growth will average 3.2 percent in 2013-2022. Georgia's economic growth model is heavily dependent on external financing for investment, as domestic savings are low.
This is also reflected in the country's large current account deficit, though this declined significantly over 2019 before widening sharply due to the impact of the coronavirus outbreak on particularly the tourism sector. As such, the Georgian authorities face the challenge of ensuring robust growth, while simultaneously reducing external vulnerabilities.
Moody's considers that convergence towards EU standards in line with the Association Agreement (AA) and Deep and Comprehensive Free Trade Agreement (DCFTA) will likely lead to further improvements in the country's institutional capacity, notably in the areas of rule of law, governance, and the development of a market economy.
Moody's assessment of Georgia's fiscal strength reflects the impact of the coronavirus pandemic which has driven a surge in its debt burden, from 42 percent of GDP in 2019 to more than 61 percent in 2020. Partly offsetting this, Georgia benefits from a favorable debt structure, with the vast majority of its debt being in the form of multilateral and bilateral loans, which are more easily rolled over and are on concessional terms. These concessional loans help keep Georgia's debt affordable, with interest expenses accounting for only 6.2 percent of general government revenue in 2020. Georgia's fiscal rule should be supportive of fiscal consolidation over the medium term.
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