On 30 May 2025, Fitch Ratings has affirmed Georgia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BB’ with a Negative Outlook.
The 'BB' rating is supported by Georgia's high level of economic development relative to 'BB' peers, a credible macro-fiscal policy framework, moderate public debt, and sound banking sector. These are balanced by relatively high financial dollarisation, high exposure of public debt to foreign-currency risks, and weaker external finances than peers, including moderate international reserves, and relatively high net external debt. The Negative Outlook reflects heightened political risk and possible external liquidity pressures.
International reserves were USD4.52 billion (equivalent to 2.3 months of current account payments) in April 2025, recovering from a 13% month-on-month drop in October 2024, when the National Bank of Georgia (NBG) sold reserves to support the currency. However, they are still 17% below the August 2023 peak, while net international reserves are 33% below September 2024 levels.
Immediate liquidity risks are low, but the reserve position is vulnerable to a sharp drop in market sentiment, triggered for example by a sharp increase in political risks in Georgia, resulting in higher dollarisation or capital flight. Fitch expects the NBG to continue FX purchases, notwithstanding its commitment to a floating exchange rate, which could ease pressure on reserves. Fitch forecasts reserves to average 2.2 months of current account payments in 2025-26.
Georgia's large current account deficit relative to peers is a consistent credit weakness, and is set to continue, with Fitch projecting it will average 4.6% of GDP in 2025-26 (2024: 4.4%; current 'BB' median: 2.5%), primarily driven by a large goods deficit. The tourism sector, with average annual growth of 12% in 2023-24, will support a solid services surplus. Georgia's net external debt, at 43% of GDP as of 2024, is nearly 3x the 'BB' median. However, risks are mitigated by high inter-company lending in the debt stock.
Foreign direct investment (FDI) inflows (in US dollar terms) fell by 34.5% yoy to 4% of GDP in 2024, likely reflecting investor concerns about heightened political risks following the passage of a controversial Transparency of Foreign Influence Law, and disputed elections. Fitch forecasts net FDI to recover in 2025-26 to an average of 3.8% of GDP (albeit still insufficient to cover the current account deficit).
Georgia's domestic political and societal fragmentation continues, with the opposition boycotting parliament following the disputed parliamentary and presidential elections in 4Q24. Parliament has since passed legislation that tightens rules around disbursal of foreign grants to civil society organisations, and is deliberating another law that could effectively ban major opposition parties.
Georgia's EU accession negotiations remain effectively suspended and the US Congress is currently considering legislation that if passed raises risks of US sanctions on senior Georgian officials. In Fitch's view, risks to institutional independence could widen if political polarisation continues to worsen, also posing risks to external donor flows or economic performance (although neither is evident at present).
Real economic growth remains strong in Georgia at 8.8% yoy in January-April 2025 (2022-24 annual average: 9.4%), owing to strong services sector performance. In Fitch's view, potential growth (currently estimated at 4.8%) has been boosted by investments in the information and communications technology, hospitality, transport and construction sectors. Fitch expects growth of 5.6% in 2025 and 5.2% in 2026, with upside from productivity enhancements.
Domestic demand is strong, but inflation remained below the NBG's target of 3% in 2024, although it exceeded it in March-April 2025, averaging 3.4% partly due to base effects. Fitch expects inflation to average 3.2% in 2025-26. The NBG has kept policy rates unchanged at 8% since May 2024, and is unlikely to cut rates given the potential for looser monetary conditions to boost FX demand. Monetary policy transmission is somewhat constrained by high levels of dollarisation (end-1Q25: 53.5% of deposits and 43.1% of loans).
Georgia has a record of overperforming budget targets. Fitch expects the general government deficit to average 2.3% of GDP in 2025-26 (2024: 2.3%, 'BB' median: 2.8%), well below the 3% ceiling. Gross general government debt (GGGD)/GDP fell to a 10-year low of 36.1% at end-2024 ('BB' median: 53.8%), aided by strong nominal GDP growth. Fitch projects GGGD/GDP to average 35.8% in 2025-2026 (well below the 60% debt ceiling), with exchange rate depreciation a key risk. Fitch expects the authorities to roll over a USD500 million Eurobond maturing in April 2026.
Georgia has ESG Relevance Scores of '5' for Political Stability and Rights, and '5[+]' for the Rule of Law, Institutional and Regulatory Quality, and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model (SRM). Georgia has a medium WBGI ranking at the 61st percentile, reflecting moderate institutional capacity, established rule of law, a moderate level of corruption, and political risks.
