Oct 9, 2010

Moody's praises Georgia economic reforms, assigns Ba3 rating

Ratings agency Moody's on Wednesday praised Georgia for its economic reforms and for a pro-business environment "unique in the region" as it assigned a Ba3 rating to the ex-Soviet republic.

Tbilisi welcomed the rating, saying it showed the economy was returning to confidence levels seen before its disastrous 2008 war with Russia and the global economic downturn.

Moody's Investors Service assigned the Ba3/not-prime foreign and local currency issuer rating, with a stable outlook, in its first assessment of Georgia's credit worthiness.

In a statement, Moody's praised Georgia's "progress in building social, political, and economic institutions and providing a healthy operating environment for business that is unique in the region."

It said the government had undertaken a "pro-active response to the global crisis and the 2008 conflict with Russia," addressing a major drop in foreign direct investment while maintaining "affordable debt service."

Moody's raised concerns about "geopolitical risks due to the unresolved conflict with Russia" but said it had assessed "Georgia's susceptibility to event risk at moderate."

A Ba3 rating is judged to have speculative elements and be subject to substantial credit risk.

Finance Minister Kakha Baindurashvili said the rating "means Georgia has returned to its pre-war credit ratings when the country's economy was at its peak. Georgia's economy is returning to the trends from those times."

Georgia's once-booming economy has suffered from investor flight since 2008, with foreign direct investment dropping 51 percent last year and the economy contracting by 3.9 percent in 2009.

The economy has since shown signs of recovery, growing 8.4 percent year-on-year in the second quarter of 2010, according to government figures.

Ratings agencies such as Fitch, Standard and Poor's and Moody's assess the capacity of governments or companies to repay their debts. A stronger rating generally enables a borrower to acquire credit on more favourable terms.

Copyright © 2010 AFP. All rights reserved.