Rating action

Scope Ratings GmbH (Scope) has today affirmed the Republic of Georgia’s long-term local- and foreign-currency issuer and senior unsecured debt ratings at BB, with Negative Outlooks. The short-term issuer ratings have been affirmed at S-3 in foreign- and local-currency, with Stable Outlooks.

Georgia’s BB long-term ratings are supported by: i) moderate levels of government debt and a strong government debt profile; ii) a solid medium-run economic growth potential; and iii) a strengthened macroeconomic-policy framework.

Georgia’s long-term ratings are challenged by: i) domestic institutional risks following October-2024 parliamentary elections; ii) sustained geopolitical risks after Russia’s escalation of war on Ukraine; iii) vulnerability to external shocks due to higher albeit still moderate external-sector buffers, the small size of the economy, alongside high reliance on external financing; and iv) financial-stability risks associated with the significant dollarisation of the economy.

For the updated report accompanying this review, click here.

Key rating drivers

A moderate and declining government debt trajectory, as well as strong government debt profile. Georgia’s fiscal outlook is underpinned by a modest general government deficit of 2.2% of GDP in 2025, 2.4% in 2026 and 2.0% on average between 2027 and 2030. High nominal growth and a historical commitment to fiscal prudence underpins the projected stabilisation of general government debt at around 34% of GDP by 2030 in the absence of major shocks.

Refinancing risks related to domestic and external uncertainties are further mitigated by a favourable debt profile. More than half of general government debt is on concessional loan terms¹ due to the history of sound engagement with the IMF and other international concessional donor institutions. This supports a comparatively long debt maturity and moderate net interest payments that are projected at around 6% of general government revenue (1.7% of GDP) on average over 2025-30. Strong government debt structure furthermore decreases the public sector balance sheet’s vulnerabilities to external-sector crises, especially relevant given that around 70% of general government debt is denominated in foreign currency². The authorities are expected to roll over the USD 500m Eurobond maturing in April 2026.

A robust medium-term economic growth potential. The economy is anchored by strong growth potential estimated at 5% per year. The economy has recently grown well above this high trend rate, benefitting from strong services-sector exports, financial inflows and large-scale arrivals of skilled workers from Russia, Belarus and Ukraine after the escalation of the military conflict in 2022. In the aftermath of robust output growth of 9.4% in 2024 and an estimated 7.2% in 2025, real GDP growth is foreseen staying strong at 5.2% on average over 2027-30. Although large investment in the real estate sector could support growth prospects, heightened domestic and geopolitical uncertainties could weigh on consumers and investors’ confidence, as well as on net exports. Questions surrounding the independence of the National Bank of Georgia³ could also weigh on the monetary policy framework and on the inflation outlook.

Credit challenges: i) domestic institutional risks; ii) sustained geopolitical risks; iii) vulnerability to external shocks; and iv) financial stability risks.

Georgia’s long-term ratings are challenged by the weakening of domestic institutions with the passage of a controversial Transparency of Foreign Influence Law, rises of civil instability, disputed parliamentary and presidential elections, increased sanctions risks and associated implications for effective policy making.

Challenges for Georgia’s domestic institutions and the pro-Russian leaning of the Georgian Dream government have seen greater fragmentation within society and political opposition boycotting parliament and October 2025 municipal elections. Georgia’s ruling party Georgian Dream has recently taken formal steps to introduce electoral code changes, including ending overseas voting, and ban major opposition parties by filling a constitutional lawsuit.

Western sanctions against Georgia have to date been targeted and deliberately restrained, but the risk of further sanctions is high, and any severe escalation of sanctions and/or curtailment of access to Western financing can have direct effects on repayment risks. Similarly, the risk of international sanctions against Georgia could increase further should the country continue to benefit from Russian-linked trade and capital flows. In May 2025, the US House of Representatives approved the bi-partisan MEGOBARI Act that is currently under discussion in the Senate.

Furthermore, Georgia’s long-term ratings are challenged by greater geopolitical sensitivities after Russia’s full-scale war on neighbouring Ukraine. The geopolitical risks for Georgia consider the land border with Russia, latent tensions around the separatist regions of Abkhazia and South Ossetia, and the spectre of re-escalation of conflict long run after the nation’s 2008 conflict against Russia. After Ukraine, Scope views Georgia as one of the most geopolitically at-risk sovereigns in Eastern Europe.

Higher albeit moderate external-sector buffers hamper the shock-absorption capacity amid high political and geopolitical risks. Official reserves increased to USD 5.6bn as of October 2025, in line with previous highs of USD 5.4bn in August 2023, thanks to net purchases by the National Bank of Georgia⁴, higher gold prices and remittances, as well as lower dollarisation. Reserves coverage of short-term external debt and imports is estimated above 100% and 3 months of imports respectively, although both metrics remain below 2021 levels (more than 210% and 5 months of imports).

Despite a floating exchange rate regime, Georgia remains vulnerable to external shocks due to the small size of the economy (nominal GDP estimated at USD 37bn in 2025) and elevated reliance on external financing. The NIIP is highly negative (-93% of GDP in Q2 2025) and the current account deficit is projected to average 5% of GDP by 2030. High external gross financing requirements (estimated at 15% of GDP on average by 2030), and more uncertain foreign capital inflows, due to the suspension of the IMF programme and delay in EU accession talks until 2028, raise uncertainty on the sustained replenishment of international reserves.

Finally, Georgia’s long-term ratings are challenged by financial stability risks related to lower albeit still high dollarisation of the economy. The share of loans and deposits denominated in foreign currency stood at 42% and 50% respectively as of October 2025. Although both metrics steadily declined since 2016, the dollarisation of the domestic financial system remains elevated, including relative to credit rating peers, which limits the resilience against domestic and external shocks.

Rating-change drivers

The Negative Outlook reflects Scope’s view that risks to the ratings are skewed on the downside over the next 12 to 18 months.

Upside scenarios for the ratings and Outlooks are (individually or collectively):

1. Institutional weakening is reversed, civil and political instability moderates, and/or risks of further sanctions are curtailed;
    
2. Geopolitical and security risks are eased significantly;
    
3. External-sector risks are curtailed, such as reductions of structural current-account deficits and/or the re-accrual of foreign-exchange reserves.

Downside scenarios for the ratings and Outlooks are (individually or collectively):

1. A weakening of domestic institutions and/or rise in civil instability undermines governability, elevating sanctions risks and/or increasing the risk of heightened political instability;
    
2. An escalation of geopolitical risks meaningfully elevates adverse long-run implications;
    
3. External vulnerabilities were to rise, resulting in significant adverse effects for reserve adequacy and/or for the repayment of the external debt;
    
4. The medium-run public-debt trajectory weakens, as an example, due to a looser commitment to budgetary discipline and/or weaker-than-foreseen nominal growth.

Sovereign Quantitative Model (SQM) and Qualitative Scorecard (QS)

Scope’s SQM, which assesses core sovereign credit fundamentals, signals a first indicative credit rating of ‘bbb+’ for Georgia. Under Scope’s methodology, the indicative rating receives 1) no positive adjustment from the methodological reserve-currency adjustment; and 2) one-notch negative adjustment from the methodological political-risk quantitative adjustment. On this basis, a final SQM quantitative rating of ‘bbb’ is reviewed by the Qualitative Scorecard (QS) and can be changed by up to three notches depending on the size of Georgia’s qualitative credit strengths or weaknesses compared against a peer group of sovereign states.

Scope has identified the following QS relative credit strength for Georgia: i) ‘growth potential and outlook’. Conversely, the following credit weaknesses have been identified in the QS: i) ‘macro-economic stability and sustainability’; ii) ‘current account resilience’; iii) ‘resilience to short-term external shocks’; and iv) ‘governance factors’.

In addition, a final two-notch extraordinary downside adjustment is applied to the long-term ratings, reflecting one notch for: i) elevated geopolitical risks faced by the nation given geographical proximity to and a history of aggression from Russia alongside unsettled disputes over the separatist regions of South Ossetia and Abkhazia; and a second notch for: ii) heightened domestic institutional risks and the associated risks of sanctions, following disputed elections and high risk of social tensions.

Combined relative credit strengths and weaknesses as well as additional considerations generate a three-notch negative adjustment via the QS and signal BB long-term ratings for Georgia.

A rating committee has discussed and confirmed these results.

Factoring of environment, social and governance (ESG)

Scope explicitly factors in ESG issues in its ratings process via the sovereign-rating methodology’s stand-alone ESG sovereign-risk pillar, which holds a significant 25% weight under the quantitative model (SQM) and 20% weight under the methodology’s qualitative overlay (QS).

Environmental factors are explicitly considered in the ratings process via an environment sub-category of the ESG sovereign risk pillar. Georgia’s exposure to natural disasters is in line with credit rating peers and CO2-emissions intensity is moderate. Meaningful environmental risks are partially mitigated by coordinated policy measures such as reductions of air pollution and carbon emissions. The 2030 climate-change strategy aims to curtail greenhouse-gas emissions to 35% below 1990 levels for core sectors. However, energy is predominantly imported, natural gas and oil products making up three quarters of the aggregate energy supply. This drives Scope’s ‘neutral’ qualitative assessment relative to sovereign peers.

Socially related factors are captured under the sovereign methodology in the SQM via accounting Georgia’s elevated poverty ratio, high structural unemployment and weak social safety nets representing long-term challenges. Income inequality is in line with credit rating peers and the old age dependency ratio compares favourably against most of the peers. Demographic outlook is relatively favourable and it has been supported recently by significant inflows of skilled-labour force from Russia, Belarus and Ukraine. This drives Scope’s ‘neutral’ qualitative assessment relative to sovereign peers.

Under governance-related factors, Georgia scores higher relative to rating peers according to the World Bank’s Worldwide Governance Indicators under the SQM. The European Council granted Georgia EU candidate status in December 2023, but this status has since been suspended after the introduction of the foreign-agent law in 2024. The European Commission’s 2025 Enlargement Package highlights a weakening of domestic institutions and a slowdown in reforms key to EU membership. Governance is seen remaining a relevant credit rating challenge for the foreseeable future, especially because of the risk of escalating sanctions, driving Scope’s ‘weak’ QS assessment relative to sovereign peers.

Rating Committee
The main points discussed by the rating committee were: i) domestic economic risk; ii) public finance risk; iii) external economic risk; iv) financial stability risk; v) ESG-related risk; and vi) rating peers.

Rating driver references
1. Ministry of Finance of Georgia, Public Debt Management Department, Monthly Debt Report, October 2025
2. Ministry of Finance of Georgia, General Government Debt Management Strategy, 2025 – 2029
3. IMF, Article IV Consultation, July 2025
4. National Bank of Georgia, October 2025

Methodology
The methodology used for these Credit Ratings and/or Outlooks, (Sovereign Rating Methodology, 27 January 2025), is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings and/or Outlooks is (Sovereign Quantitative Model (ex CVS Model) Version 4.1), available in Scope Ratings’ list of models, published under scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party participation           NO
With access to internal documents                                        NO
With access to management                                                 NO
The following substantially material sources of information were used to prepare the Credit Ratings: public domain.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings and/or Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Thomas Gillet, Director
Person responsible for approval of the Credit Ratings: Alvise Lennkh-Yunus, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 30 June 2017. The Credit Ratings/Outlooks were last updated on 10 January 2025.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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