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Fitch improved Georgia’s rating2009-08-27 14:49
Fitch Ratings, the international rating agency affirmed Georgia's Long-term foreign and local currency Issuer Default Ratings (IDRs) at 'B+'. At the same time, Fitch has affirmed Georgia's Short-term foreign currency IDR at 'B' and upgraded its Country Ceiling to 'BB-' from 'B+'. The ratings have been removed from Rating Watch Negative (RWN), and the Outlooks on the Long-term IDRs are now Stable - RIA Novosti.gt-en-newsitem-inside
"The inflow of massive international financial assistance is supporting Georgia's economy and creditworthiness following the war with Russia in August 2008 and the global financial crisis, while the risk of a third shock of major domestic political instability has receded as mass opposition demonstrations have dissipated," commented Edward Parker, the head of Emerging Europe in Fitch's Sovereigns team.
According to Fitch prognosis the GDP of Georgia will decrease by 4 per cent in 2009 [less then in many comparable states in the region], in 2010 it will grow by 2 per cent. At the same time, the country faces significant challenges. Its government revised its budget deficit target to 9.4% of GDP this year and will need to enact painful fiscal consolidation over the medium term to restore public finances to a sustainable path. Fitch forecasts that net government debt will rise to 38% of GDP at end-2011 from 22% at end-2008. Nevertheless, this would still leave it below the 10-year 'B' range median, and much of Georgia's debt is concessional, with long maturities and low interest rates - Cbonds.
Fitch forecasts a sizeable CAD of 16% of GDP this year, albeit down from 23% of GDP in 2008, leaving the country dependent on external financing. Gross and net external debt ratios are well above 'B' range medians. The tradeable sector is narrow and exposed to shocks. Georgia needs to rebalance its economy, correct the twin deficits and secure a resumption of private capital inflows before international aid tapers off and debt repayments step up sharply in 2012-14.
Political risk is relatively high and is a material constraint on the ratings. Fitch does not anticipate renewed military conflict with Russia or a major increase in domestic political instability, but risks still remain.