Fitch Ratings has affirmed Georgia’s Long-Term Foreign - Currency Issuer Default Rating (IDR) at “BB” with a stable outlook.

The Fitch claims long-standing support from official creditors have helped reduce risks to macro stability and supported financing needs.

“These credits strengths are balanced by significant exposure of public debt to foreign-currency (FC) risk, high financial dollarization, and external finances that are significantly weaker than the majority of ‘BB’ category rated peers…

Georgia’s economy expanded robustly in 2021. Real GDP growth is estimated to have reached 10.6% in 2021, following a contraction of 6.8% in 2020. Economic recovery has been driven by domestic demand, strong inflows of net remittances, a partial tourism recovery, and fiscal stimulus (e.g. subsidies and social benefits). Growth in exports of goods also performed strongly due to the recovery of key trading partners and higher commodity prices.

Annual inflation accelerated to 13.9% in December, reflecting higher global commodity prices, GEL depreciation and a spike in utility prices. With inflation significantly above the target of 3.0% and increased short-term price expectations, the National Bank of Georgia (NBG) tightened monetary policy, increasing the policy rate a cumulative 250bp, from 8.00% to 10.50%.

We expect the NBG to maintain a tight policy stance for 2022. Fading out of high base effects should start to bring down inflation from 2Q22. However, the risk of high inflation expectations becoming entrenched is a vulnerability. We forecast average inflation of 7.0% in 2022, after 9.6% in 2021”, - says the Fitch.