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Outlook On Georgia's Currency Ratings


Fitch Raises Outlook On Georgia's Currency Ratings To Positive

Fitch Ratings lifted its outlook on Georgia's long-term foreign and local currency issuer default ratings to positive from stable, increasing the possibility of an upgrade, citing the nation's strong economic recovery, reductions in its budget and current account deficits and reduced political risk.

An upgrade of the B+ ratings--four levels below investment-grade territory--is possible if the government continues to cut its deficit and debt levels, as well as a "longer track record of robust and sustained economic growth." A downgrade is possible if it fails to reduce the deficit and stabilize its debt ratios or it experiences "another severe bout of political instability" or its capital inflows or trade growth fall short.

Fitch estimates the Georgia's gross domestic product will expand 5% this year and 6% next year, after growing 6.5% in 2010 and contracting 3.9% in 2009.

Fitch said it thinks the government's deficit reduction goals for 2011 and 2012 are achievable thanks to the strengthening economy. It also noted that Georgia's banking sector has strengthened thanks to improved asset quality, deposit growth and rising profits.

Political risk also appears to have eased in the past 18 months, according to Fitch, though it remains "relatively high." Though relations with Russia remain difficult, Fitch said it doesn't see "a resumption of military conflict in the foreseeable future," and that domestic tensions also appear to have eased.