Standard& Poor's (S&P) anticipates that Georgian Dream-Democratic Georgia's (GDDG) victory in the October parliamentary election will not result in any significant policy changes, the ratings agency wrote in an analysis on November 11, in which it also reaffirmed the country's rating at 'BB-/B' with a stable outlook.
The S&P report came out the same week as a report by Moody's, which also reaffirmed the country's rating and said it was not expecting any major policy changes from a second GDDG administration. S&P elaborated by saying that the government was expected to maintain public finances in strong shape and to focus on economic growth, but that the landslide victory, which ensured a constitutional majority for GDDG of 115 seats out of 150 in parliament, could erode democratic checks and balances. The latter, however, is not S&P's baseline scenario, as Georgia has some of the strongest institutions in the region, the agency added.
S&P forecasts economic growth to the tune of 2.8% in 2016, which will gradually increase over the coming years up to 5% in 2019. The factors supporting this optimistic forecast are the robust investment anticipated to come on line in the next two years, underpinned by a number of public and private projects in energy and tourism; strong consumption performance supported by moderate inflation levels; and a strengthening export performance starting in 2017 on the back of government efforts to diversify exports and an economic recovery in Russia and Azerbaijan, important trade partners of Georgia's.
The agency added that government debt is expected to inflate to 3.5% of GDP in 2017-2019, in part due to the depreciation of the Georgian lari and the high level of dollarisation of Georgia's external debt. External government debt is expected to peak at 43% of GDP in 2018. Georgia's weak external position remains one of the main constraints on its rating, as the current account deficit has continued to grow, reaching a four-year high of 12% of GDP in 2015.
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