TBILISI

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’.

Georgia’s economic recovery continued to gather pace as the country eased the majority of the restrictions it had imposed to curb the coronavirus pandemic, businesses reopened and tourists tentatively started to return.

Fitch said that the outlook revision “reflected 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.”

The agency said that the country 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. This year’s projected strong economic recovery will help government debt to start declining, while accumulated fiscal buffers will help limit pandemic-related risks,” Fitch said in a report.

Gross domestic product (GDP) grew by 12.7 percent year-on-year in the first half of 2021 after contracting 5.8 percent in the same period last year, the National Statistics office said. In June alone the economy expanded by 18.7 percent, compared with a 7.7 percent contraction a year ago. Growth was recorded in all sectors of the economy except for the mining industry.

Fitch said that beyond the base effect, activity had been supported by growth in remittances, goods exports, and a gradual return of tourists.

The stronger economic activity has led Fitch to revise up 2021 real GDP by 3.5 percentage points from its review six months ago, to 7.8 percent after a contraction of 6.2 percent in 2020, implying that output will exceed its 2019 level this year.

“For 2022-2023, a more robust recovery in the tourism sector and an increase in investment, means we forecast real GDP growth to average 5.4 percent, above the potential of 4.0-4.5 percent,” the agency said.

“Risks surrounding the pandemic, pace of vaccination roll-out, and upcoming local elections in October, pose downside risks to our macroeconomic baseline,” it added.