S&P forecast: Georgia's foreign economic indicators to improve by end of 2022
Baku, Azerbaijan, October 17
By Tamilla Mammadova – Trend:
Georgia’s foreign economic indicators will improve by the end of 2022 as the reserves of the National Bank of Georgia (NBG) increase and the current account deficit decreases, Trend reports citing S&P Global Ratings.
The floating exchange rate and generally independentNBG operations support monetary policy flexibility, but the high level of dollarization of the country's economy remains a deterrent.
“From our point of view, the balance of payments of Georgia remains vulnerable. The economy of Georgia, as before, is small and open, characterized by a narrow export base and a significant amount of external liabilities due to constant deficits over the years,” S&P notes.
In this regard, the economy is sensitive to changes in external factors. The public sector accounts for one third of external debt: this part of debt obligations is mainly issued on concessional terms and has long maturities.
At the same time, the Georgian economy needs to refinance external debt in the amount of almost 30 percent of GDP annually, which makes it potentially exposed to risks associated with worsening external conditions. These debt obligations include deposits of non-residents, as well as trade loans to the Georgian corporate sector, the report said.
“Despite the remaining vulnerability of the foreign economic position of Georgia, NBG was able to increase the volume of foreign exchange reserves, which, in our opinion, partially reduced foreign economic risks,” S&P noted.
Despite the fact that a hypothetical significant reduction in foreign direct investment (FDI) inflows does not have to lead to such stressful situations as a sharp depreciation of the lari, it can have consequences for economic growth and the level of employment of the Georgian population.
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