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Thursday,
July 19,
2007, #136 (1403) International ratings agency Fitch Ratings assigns Georgia a “BB-” long-term sovereign rating, with a “stable outlook.” Fitch said the rating reflects a declining burden of public debt, a rapid GDP growth rate, an impressive record of structural reforms, buoyant foreign direct investment (FDI) inflows and strong international financial support. In the Fitch ratings system there are 22 ratings; “BB-” is the tenth rating. Georgian government officials think that the rating will enable Georgian commercial banks to attract foreign capital under lower interest rates allowing banks in turn to offer lower interest rates to Georgian customers. “People will be able to buy houses, tractors, secure agriculture loans, create enterprises and invest more money in infrastructure,” President Mikheil Saakashvili said at the government session on Wednesday. Minister of Finance Aleksi Aleksishvili added that the new rating would be another argument for foreign investors to come to Georgia. However, the ratings agency also mentioned several constraints to the rating. “The country's short track record of economic performance, moderate income level, large current account deficit, narrow economic base and susceptibility to various economic and political shocks are constraints on its rating,” head of Emerging Europe Sovereigns at Fitch, Edward Parker said. Fitch said it expected real GDP growth in Georgia to be around 10 percent this year, compared to an average 9.5 percent in 2005 and 2006. The agency also said GDP growth will be boosted by ambitious structural reforms and FDI which could be around 18 percent of GDP. The agency mentions the country’s public finances as one of the rating’s strengths. In particular, it mentions tax reform, the fight against corruption and economic growth helped the government raise tax revenues to 26 percent of GDP in 2006 from just 16 percent in 2003. Fitch expected the government debt to decline to 26 percent of GDP at the end of 2007, down from 71 percent at the end of 2002. Another factor affecting the rating is political risks. Fitch says Saakashvili has moved to a Euro-Atlantic orientation after the Rose Revolution in 2003 and launched reforms that strengthened democratic institutions and reduced corruption. They also suggest that the ruling party will dominate the next cycle of elections “offering the prospect of an extended period of strong, stable and reformist government.” However, the agency also addresses the existing difficulties in Russian–Georgian relations, but adds the Georgian economy “is coping well so far” with the Russian trade embargo. Finally Fitch notes its concern about the risk of flare-ups in the conflict zones of Abkhazia and South Ossetia. According to the Ministry of Finance, other countries with a Fitch rating of “BB-” rating include Ukraine, Turkey and Serbia. Last November another rating agency Standard & Poor's Ratings Services revised downwards its outlook on Georgia to stable from positive, naming increased geopolitical risk as a reason. However, it still reaffirmed the “B+/B” long-term and short-term sovereign credit ratings for Georgia. |
Stable Outlook for Georgia, says Fitch Ratings, Citing Strong Public Finances