On Feb. 6, 2026, S&P Global Ratings affirmed its 'BB/B' long- and short-term sovereign credit ratings on the Government of Georgia. The outlook is stable.
Outlook
The stable outlook reflects Georgia's solid economic and fiscal performance, which is partially offset by its reliance on potentially temporary drivers, notably migration-related inflows and short-term capital inflows.
Downside scenario
We could consider a negative rating action if political tensions were to escalate to the point of eroding investor confidence and weakening Georgia's growth outlook. Rating pressure could also emerge if the large capital and migration inflows observed in the aftermath of Russia’s 2022 invasion of Ukraine were to reverse over a sustained period. The rating could also come under pressure if public finances or external buffers were to deteriorate, or if concessional financing were to decline materially, potentially as a result of prolonged political uncertainty or governance concerns.
Upside scenario
We could consider a positive rating action if Georgia’s external buffers strengthen further, supported by continued foreign exchange reserve accumulation, or if fiscal outcomes exceed our expectations. A higher rating could also result from an easing of political tensions that supports more predictable policymaking and stronger policy anchors, including renewed momentum on EU accession, should the European Council reconsider its de facto decision to halt the process.
Rationale
Our rating on Georgia is constrained by its relatively low income levels and a still-developing external position, reflecting the economy’s dependence on imports and sizable external liabilities. Moderate financial dollarization also somewhat weakens monetary policy transmission, in our view.
These constraints are partly offset by a comparatively strong policy framework, moderate government debt levels, a largely floating exchange rate regime, and access to timely concessional financing from international financial institutions. While there is a risk that policy effectiveness could weaken under adverse conditions, these factors currently provide important support to the rating.
Institutional and economic profile: Political tensions have eased, but uncertainty remains elevated
- Political tensions have cooled since the 2024 elections, with protests subsiding and partial opposition re-engagement in parliament, although political polarization remains elevated and limits broader dialogue.
- Relations with Western partners remain weak, with EU accession effectively stalled and U.S. engagement cautious, reducing external policy anchors and increasing medium-term policy and regulatory uncertainty.
- Economic growth has remained very strong despite political uncertainty, supported by robust domestic demand, and is expected to continue outperforming peers in the near term.
Over the past few months, the political climate has stabilized with a gradual decline in large-scale opposition protests following the 2024 electoral cycle. In late 2025, the For Georgia party ended its parliamentary boycott and resumed participation in legislative proceedings, marking a partial return of opposition representation. Nevertheless, most major opposition parties, including the United National Movement and Lelo, continue to boycott parliament, limiting opposition engagement within formal institutions. While public order has remained stable, political polarization persists and limits broader political dialogue. However, this has not materially disrupted day-to-day government functioning to date.
These domestic political developments have attracted increased international attention and impeded Georgia’s relations with both the EU and the U.S. Relations with the EU have cooled materially, with accession-related engagement effectively stalled following the suspension of Georgia’s accession process in mid-2024 and the subsequent halting of parts of EU financial assistance. The EU has also suspended visa facilitation for Georgian diplomatic and official passport holders and reduced the intensity of high-level political dialogue, citing concerns over governance developments, including the enactment of the Law on Transparency of Foreign Influence and the conduct of recent elections. While formal cooperation frameworks remain in place, progress on integration benchmarks has slowed and EU conditionality has become more explicit.
Relations with the U.S. also remain strained, although concrete policy consequences have so far been limited. While the bipartisan MEGOBARI Act passed the U.S. House of Representatives in May 2025, it has remained on the Senate floor since then, with no clear indication that it will advance to enactment. In this context, and amid broader global geopolitical priorities, Georgia does not appear to rank highly on the U.S. foreign policy agenda. This reduces the likelihood of near-term escalation beyond rhetorical or legislative signaling.
We anticipate that Georgia's EU accession prospects will remain stalled over the medium term, reflecting the currently strained relations. Georgia's relationship with the U.S. has also been complicated by policy shifts, including from the U.S. In late 2024, the U.S. Department of the Treasury imposed sanctions on two Georgian state officials after determining that they had been responsible for “crackdowns on media members, opposition figures, and protesters--including during demonstrations throughout 2024.” These sanctions remain in place.
We continue to view elevated domestic political uncertainty, the suspension of Georgia’s EU accession process, and shifting relations with Western partners as medium-term downside risks to growth and investment, although these factors have not yet materially derailed economic performance.
Despite these factors, the Georgian economy has remained resilient, with growth estimated at 7.5% in 2025, driven primarily by private consumption. Looking ahead, we expect growth to gradually decelerate to about 5.4% in 2026 and 4.8% in 2027, as consumption normalizes. We anticipate a moderation in private investment (excluding government investment), consistent with a more cautious investment environment amid elevated political uncertainty and the EU’s decision to suspend Georgia’s accession process. Our baseline does not incorporate the potential Eagle Hills investment, estimated at up to US$6 billion (about 15% of GDP); however, if implemented, it would represent a material upside risk to growth, investment, and medium-term confidence, particularly through higher foreign direct investment (FDI) and construction activity.
Georgia’s fiscal and monetary policy frameworks remain comparatively prudent within the regional context, underpinned by past structural reforms that have supported macroeconomic stability and an improved business environment. However, policy predictability has weakened over the past two years, reflecting both domestic political developments and changes in Georgia’s external policy anchors. The effective stalling of the EU accession process has reduced an important external reference point that previously supported reform momentum and investor confidence. In parallel, a series of recent legislative initiatives, including measures affecting foreign funding and civil society, have at times been advanced with limited consultation and rapid adoption, contributing to heightened regulatory uncertainty.
Flexibility and performance profile: Public debt composition remains favorable, while the external profile is a relative weakness, although it is improving
- Fiscal performance remains strong, with general government deficits of about 2% of GDP and net debt stabilizing at low levels, supported by a favorable debt structure dominated by long-maturity, concessional official financing.
- The external profile remains a relative weakness, reflecting persistent current account deficits and elevated net external liabilities. However, it is improving, supported by stable FDI inflows and a sharp rebound in foreign exchange reserves to record highs, which has materially strengthened external liquidity buffers.
- Inflationary pressures are easing, and monetary policy remains moderately tight, with inflation expected to converge toward the central bank’s target.
Georgia’s fiscal framework remains prudent, supported by a conservative policy stance, a track record of spending discipline, and Maastricht-like deficit and debt thresholds. In line with recent years, we expect general government deficits to remain at about 2% of GDP, underpinned by steady revenue mobilization and restrained spending growth, with net debt stabilizing at about 34% of GDP over the medium term. We expect financing needs to be met through a mix of domestic borrowing and external funding, predominantly from international financial institutions such as the World Bank and the Asian Development Bank, supporting a favorable debt profile. Although roughly 70% of government debt is denominated in foreign currencies, this share has been declining since 2020, while the predominance of concessional, long-maturity official financing mitigates refinancing and rollover risks.
We expect Georgia’s current account deficit to widen to 4.1% of GDP in 2026, from an estimated 3.7% in 2025, mainly reflecting a wider trade deficit and moderating remittance inflows. These pressures are partially offset by robust tourism receipts, which continue to support the services balance, as well as ongoing private transfers. Over 2027-2029, we forecast the current account deficit to average around 4.3% of GDP, broadly consistent with Georgia’s structural gap between relatively high investment needs and low domestic savings. We expect these deficits to be financed primarily through stable net FDI inflows, particularly into the energy, infrastructure, and tourism sectors, alongside concessional funding from international financial institutions supporting priority public investment. Notably, our baseline does not incorporate the proposed Eagle Hills investment, which is focused on large-scale, mixed-use tourism and real estate developments in Tbilisi and Adjara. If implemented as planned, the project could represent a significant upside to FDI inflows and medium-term growth and support external financing resilience. However, we do not currently incorporate this into our baseline forecasts.
Although Georgia's consecutive current account deficits have declined in recent years, they have led to a substantial buildup of external liabilities. Net external debt stands at approximately 50% of current account receipts (CARs), while the total net external liability position has reached a high of about 135% of CARs. However, a significant portion of external debt is held by the public sector under concessional terms, mitigating some refinancing risks.
Foreign exchange reserves have rebounded sharply over recent months, rising by approximately 38% year-on-year to a record high of approximately US$6.2 billion in December. The accumulation reflects a combination of factors, including net foreign exchange purchases by the National Bank of Georgia (NBG) totaling US$2.4 billion, valuation gains on gold holdings, stronger tourism receipts and money transfer inflows. This reserve build-up has strengthened Georgia’s external liquidity buffer and enhanced the authorities’ capacity to manage exchange-rate volatility. Looking ahead, we expect reserves to remain broadly stable absent a material deterioration in Georgia’s relations with the EU or the U.S., or a resurgence of domestic political uncertainty that could reintroduce significant depreciation pressures on the lari. In such a scenario, we expect the NBG to use its strengthened reserve position to help smooth excessive exchange-rate volatility and support market confidence. However, sustained intervention over an extended period could moderate the pace of further reserve accumulation or result in some drawdown over the medium term.
Inflation has risen steadily over the past year, averaging 3.9% in 2025, driven primarily by base effects and higher food prices. More recently, price pressures have begun to ease, reflecting moderating demand and softer monthly price dynamics. Looking ahead, we expect inflationary pressures to gradually abate, supported by lower global commodity and food prices, with inflation forecast to decline and average about 3.5% in 2026, broadly in line with the NBG's target. Against this backdrop, the NBG maintained its policy rate at 8.0% in December 2025, reflecting a moderately tight stance aimed at balancing easing inflation dynamics against residual risks, including exchange-rate volatility and external price shocks. Going forward, the NBG is likely to proceed cautiously with monetary policy normalization, which will depend on inflation consistently moving toward its target, while retaining flexibility to respond to renewed inflationary or financial stability pressures.
Georgia's banking system remains profitable, well-capitalized, and maintains strong liquidity buffers, robust credit growth, and prudent supervisory oversight. Despite a gradual decline, dollarization in the banking sector remains relatively high, leaving balance sheets sensitive to exchange-rate movements. To address this, the NBG has continued to tighten macroprudential measures, including stricter foreign-currency lending rules and a requirement from August 2025 that individuals and companies with income in Georgian lari (GEL) may no longer take out foreign-currency loans below GEL750,000. Asset quality remains strong, with nonperforming loans remaining low at 2.6% in November 2025, reflecting continued credit expansion and conservative underwriting standards. Looking ahead, we expect banking sector metrics to remain broadly stable, although slower economic growth, elevated political uncertainty, or renewed exchange-rate volatility could test asset quality and profitability over the medium term.
In our view, strong supervisory capacity, solid corporate governance, and a high degree of transparency support Georgia's effective banking regulation that is broadly aligned with international standards. While Georgia-based banks are relatively reliant on external funding, particularly through loans and nonresident deposits, compared to peers, this risk is partly mitigated by the NBG's stringent liquidity requirements on nonresident liabilities. The sector remains highly concentrated, with the two largest banks accounting for over 70% of market share across key segments.
