Fitch Ratings has revised the Outlook on Georgia's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDR at 'BB'.

According to the report:

The Outlook revision reflects a much-improved macroeconomic baseline, and Fitch's confidence that the Georgian authorities will continue implementing policies supporting macroeconomic stability and medium-term sustainability of public finances. Georgia was hard hit by the pandemic, but it navigated the external shock well. A credible policy framework and strong support from official creditors increased external buffers despite higher financing needs.

A credible policy mix has helped underpin Georgia's resilience not just to the current Covid-19 shock, but also past external shocks from large trading partners (including Russia and Turkey). The National Bank of Georgia (NBG) adheres to an inflation-targeting mandate. Pressures from higher aggregate demand, higher import prices and a weaker lari, have led the NBG to tighten monetary policy - increasing its key policy rate three times already this year (in March (+50bps), April (+100bp) and August (+50bp)) to 10.0%. Inflation in July reached 11.9%. The tighter policy stance and fading out of one-off factors should help bring inflation down in 2H21.

Given the vulnerabilities of Georgia's highly dollarised economy, we are confident the NBG will maintain a vigilant policy stance; one that has kept both Georgia's CPI and REER volatility indicators below the historical median volatility of 'BB' peers since 2012.

High net external debt (77.4% of GDP vs the current 'BB' median ratio of 18.7%) and a low external liquidity ratio (108.9% vs current 'BB' median of 168.1%), leaves Georgia's small and highly dollarised economy vulnerable to external shocks. However, these risks have been well managed throughout the pandemic; reflecting strong donor support to meet nearly all of the government's external financing needs, and a credible macroprudential and monetary framework that has supported stability in the banking sector and managed lari volatility.

Macro: +1 notch, to reflect Georgia's policy framework strength and consistency, including a credible monetary policy framework, prudent fiscal strategy and a strong record of compliance with IMF's quantitative performance criteria and structural benchmarks. This policy mix has delivered track record of resilience to external shocks, including negative developments in its main trading partners, and reduced risks to macroeconomic stability.


Fitch Ratings