A member of the United National Movement, Levan Tarkhnishvili, declared that according to the prognosis of Fitch’s new research, Georgia’s exports will drop by 20% in 2015, foreign debt will reach 80% of the GDP, the economic growth rate will be decreased to 2% and the budget deficit will increase up to 3.5%.


verified Levan Tarkhnishvili’s statement.

Fitch Ratings Inc was founded in 1975 and together with Moody’s and S&P, it is one of the three leading statistical rating organisations. On 17 April 2015 Fitch published its research

about Georgia and respectively lowered the country’s long-term bonds obligations and national currency ranking from BB positive to BB stable.

It is argued in the research that Georgia’s economic indicators were affected by external factors (especially, the imposition of sanctions against Russia and its subsequent economic downturn). According to Fitch’s prognosis, Georgia’s exports will decrease by 20% in 2015. Of note is that Georgia’s exports registered a 28% decline in the first quarter of 2015. The export volume in January to April 2015 is less as compared to the data of the last three years.

Graph 1:

 January-April Exports by Years (USD million)

image001 Source: National Statistics Office of Georgia

Fitch’s research also concerns the country’s net foreign debt and indicates that the debt-to-GDP ratio will increase up to 80% (in 2014, this number stood at 58%). As of 31 December 2014 Georgia’s net foreign debt-to-GDP ratio was 51.7% and has been fluctuating for the last six years in the margins of 50.1% to 53.3%.

Graph 2:

 Net Foreign Debt-to-GDP Ratio

image002 Source: National Bank of Georgia  

The increase of the foreign debt volume to 80% in 2015 is related to the depreciation of GEL. On 31 December 2014 the USD to GEL exchange rate was fixed at 1.86 whilst on 15 May 2015 it stood at 2.36. Therefore, GEL has depreciated by 27%. Given the fact that Georgia’s foreign debt is denominated in USD, more GEL is necessary to repay it.

According to Fitch, Georgia’s economy will grow by 2% in 2015. The International Monetary Fund has the same prognosis.

Graph 3:

 Real Growth of GDP by Months

image003 Source: National Statistics Office of Georgia

Further according to Fitch, Georgia’s GDP per capita will drop from USD 3,623 to USD 2,923 owing to the GEL exchange rate changes which constitutes an almost 20% decline.

The research also indicates that Georgia’s budget deficit will be 3.5% of the country’s GDP. The budget deficit-to-GDP ratio hit its zenith in 2009 (9.2%) and started to shrink in the following years. In 2013, the number stood at 2.6% whilst in 2014 it rose by 0.6% and reached 3.2%

Graph 4:

 Georgia’s Budget Deficit-to-GDP Ratio

image004 Source: The Ministry of Finance of Georgia


The prognosis for Georgia’s economic and financial perspectives given in the research published by Fitch Ratings Inc matches the numbers stated by Levan Tarkhnishvili.

The organisation assumes that Georgia’s exports will drop by 20% in 2015. Georgia’s exports dropped by 28% in the first quarter of 2015. According to the research, the foreign debt-to-GDP ratio will reach 80%. Beginning from 31 December 2014 the GEL exchange rate depreciated by 27% over the following four months which in turn increased the volume of debt even further. Fitch expects that Georgia’s economic growth rate will be 2% instead of 5%. Looking at the budget deficit-to-GDP ratio, it has been on the decline since 2009 but increased from 2.6% to 3.2% in 2014. According to the organisation’s research, Georgia’s budget deficit will increase to 3.5% in 2015. The Ministry of Finance of Georgia expects that the budget deficit will not exceed 3%.

FactCheck concludes that Levan Tarkhnishvili’s statement, Fitch lowered the prognosis for Georgia’s economic growth rate, is TRUE.


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