Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Republic of Georgia (long-term local- and foreign-currency issuer and senior unsecured debt ratings: BB/Stable Outlook; short-term local- and foreign-currency issuer ratings: S-3/Stable) on 5 December 2023.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Georgia’s BB long-term ratings account for the nation’s credit strengths, such as: i) a robust medium-run economic growth potential (of an estimated 5% a year) and strong foreign direct investment inflows; ii) a strong sovereign debt profile, with three-quarters of general government debt owed to official-sector creditors, a comparatively long average debt maturity and moderate average interest rates on outstanding debt; and iii) an historical record of engagement with multilateral partners, such as with the IMF and the European Union – although the IMF programme was recently delayed after questions concerning the independence of the central bank. The European Commission has recently recommended Georgia for EU candidate status subject to outstanding steps being taken.

The ratings are, however, constrained by the following credit challenges: i) heightened geopolitical risks relevant to Georgia after Russia’s escalation of war in Ukraine; ii) domestic institutional risks; and iii) the economy’s vulnerability to external shocks due to the small size of the domestic economy alongside elevated reliance on external funding and dollarisation.

Economic growth remained robust this year, at an estimated 6.4%, although moderating from 10.2% in 2022. The Georgian economy has benefitted from a strong rebound in tourism-services exports as well as from a surge in immigration, financial inflows and transit trade following escalation of the Russia-Ukraine war, which allowed it to weather disruptions associated with the conflict to date. Scope expects some moderation in growth next year, to 4.7%, before convergence on medium-run potential thereafter.

The general government deficit is expected to remain stable this year, at 2.6% of GDP, amid moderately declining primary deficits and rising interest payments, before declining to 2.3% in GDP in 2024. After falling sharply in 2022 to 39.8% (down 9.9 percentage points from the previous year), debt-to-GDP should stay on a gradually moderating trend over the medium run and fall to 34.5% by 2028, from an estimated 38.2% this year.

The Stable Outlook represents Scope Ratings’ view that risks to the ratings are balanced.

The ratings could be downgraded or the Outlooks revised to Negative if, individually or collectively: i) escalation of geopolitical risks meaningfully elevates adverse long-run implications for the credit; ii) a rise in political risk and/or deterioration in institutions undermine/s the quality of governance; iii) external vulnerabilities were to re-rise, resulting in significant adverse effects as regards external debt sustainability and reserve adequacy; and/or iv) the medium-run public-debt trajectory weakens, due, as an example, to a looser commitment to fiscal discipline and/or a weaker-than-anticipated nominal economic-growth outlook.

Conversely, the ratings/Outlooks could be upgraded if, individually or collectively: i) geopolitical and security risks relevant to Georgia were to ease significantly; ii) the quality of institutions and democratic processes is strengthened; iii) external-sector risks are curtailed, such as a sustained reduction in current-account deficits and/or accrual of FX reserves; and/or iv) fiscal sustainability improves, such as due to further enhancements of the fiscal framework and/or additional declines in public debt.

For the updated rating review annex accompanying this review, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 September 2023) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Dennis Shen, Senior Director

© 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin.