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Resume: A country’s credit rating gives investors information about risk factors associated with investments in certain countries as well as the reliability of these countries. Dozens of agencies publish credit ratings although Standard & Poor’s(S&P), Moody’s and Fitchare the most influential and famous among them. Each credit rating agency employs its own methodology, although basic indicators are the same and include economic indicators as well as a country’s domestic and foreign policies, regional processes and the environment.

Fitch gave Georgia a BB stable outlook assessment on 22 February 2019, Standard & Poor gave the same assessment on 10 October 2019 and Moody’s gave Georgia a Ba2 stable outlook assessment on 11 September 2018. The levels of Georgia’s assessments are by and large the same. Therefore, based on the aforementioned companies’ assessments, there are certain speculative risks in the Georgian economy. In all three cases, according to Ivane Machavariani’s statement, Georgia needs to move two positions upward to reach the investment grade which would put us in the Baa3 category in the case of Moody’s and the BBB- categories in the cases of Fitch and S&P.

Analysis

The Minister of Finance of Georgia, Ivane Machavariani, made a statement in regard to the end of the International Monetary Fund’s review mission to Georgia. According to Mr Machavariani, the goals of the ongoing programme in Georgia have been successfully reached. The Minister of Finance stated: “Since 2017, all three rating agencies (Moody’s, Fitch and S&P Global) have upgraded our credit rating and we are already two steps away from the investment grade.”

Countries compete in the world’s economy to attract foreign capital. Developing or less developed nations, which have their own limited resources, are particularly dependent upon foreign capital. In turn, creditors and investors make their choices by taking into account the rate of return and stability. In other words, they make calculations vis-à-vis possible profits and risks. The lower the risks (higher reliability), the lower the rate of return for the creditor or investor of the capital in exchange for which he is ready to invest his money in the country.

A country’s credit rating gives investors information about risk factors associated with investments in certain countries as well as the reliability of these countries. Dozens of agencies publish credit ratings although Standard & Poor’s(S&P), Moody’s and Fitchare the most influential and famous among them. Each credit rating agency employs its own methodology, although the basic indicators are the same and include economic indicators as well as a country’s domestic and foreign policies, regional processes and the environment.

Standard & Poor and Fitch have similar assessment systems: AAA is the highest assessment in their system which is followed by AA+, AA,AA-, above average A+, A,A-, below average BBB+, BBB, BBB-, non-investment grade speculative BB+, BB, BB-, speculative B+, B, B-, highly risky, on the verge of bankruptcy CC and Default D. Moody’s assessment is also similar but instead of +/- it uses numerals: Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa4, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, C. The assessment positions are in turn divided into investment grade and non-investment grade. Table 1 shows the economic interpretation of the aforementioned assessments.

Table 1: Assessments of Moody’s, S&P and Fitch and Interpretation of the Assessments

Moody's

S&P

FITCH

Investment Grade

Aaa

AAA

AAA

The best investment environment, reliable and stable

Aa1

AA+

AA+

Good investment environment, higher risk than AAA

Aa2

AA

AA

Aa3

AA-

AA-

A1

A+

A+

Economic situation can affect the debtor’s solvency

A2

A

A

A3

A-

A-

baa1

BBB+

BBB+

Medium investment environment which is satisfactory at the moment

Baa2

BBB+

BBB+

Baa3

BBB-

BBB-

Non-investment Grade

Ba1

BB+

BB+

There are speculative risks in the economy

Ba2

BB

BB

Ba3

BB-

BB-

B1

B+

B+

Financial situation varies noticeably

B2

B

B

B3

B-

B-

Caa1

CCC+

CCC

Highly vulnerable and very speculative environment

Caa2

CCC

Caa3

CCC-

Ca

CC

CC

On the verge of bankruptcy

C

C

C

D

D

Default

/

Fitch gave Georgia a BB stable outlook assessment on 22 February 2019, Standard & Poor gave the same assessment on 10 October 2019 and Moody’s gave Georgia a Ba2 stable outlook assessment on 11 September 2018. The levels of Georgia’s assessments are by and large the same. Therefore, based on the aforementioned companies’ assessments, there are certain speculative risks in the Georgian economy. In all three cases, according to Ivane Machavariani’s statement, Georgia needs to move two positions upward to reach the investment grade which would put us in the Baa3 category in the case of Moody’s and the BBB- categories in the cases of Fitch and S&P.

Table 2: Georgia’s Assessment Dynamic in 2005-2019

Fitch

Standard & Poor’s (S&P)

Moody's

Date

Rating

Outlook

Date

Rating

Outlook

Date

Rating

Outlook

22.02.2019

BB

Stable

11.10.2019

BB

Stable

11.09.2017

Ba2

Stable

16.03.2018

BB-

Positive

12.04.2019

BB-

Positive

11.03.2016

Ba3

Stable

20.04.2015

BB-

Stable

22.11.2011

BB-

Stable

22.08.2014

Ba3

Positive

17.10.2014

BB-

Positive

29.03.2011

B+

Positive

06.10.2010

Ba3

Stable

15.12.2011

BB-

Stable

12.04.2010

B+

Stable

N/A

03.03.2011

B+

Positive

25.09.2008

B

Stable

26.08.2009

B+

Stable

08.08.2008

B

Negative

07.04.2009

B+

Negative

05.05.2008

B+

Stable

08.08.2008

B+

Negative

08.10.2007

B+

Positive

18.07.2007

BB-

Stable

21.11.2006

B+

Stable

N/A

06.12.2005

B+

Positive

Source: https://tradingeconomics.com/georgia/rating