Georgia the country in the South Caucasus Georgia has been given some positive signals about the health of its economy. Georgia has been described in a report as having preserved its economic and budgetary stability. The report also improved Georgia’s credit standing from stable to positive.
A credit rating is the same as the report cards you got at school at the end of a term. It is a ranking that shows how likely it is that we can lend money to a country without it getting into trouble. Many factors are taken into account when determining a credit rating such as how much debt the country has, and the strength of the country’s banks.
First, Georgia has rapidly accumulated foreign exchange reserves Reserves are the money that a country deposits in foreign currencies and gold. And this is a cushion – that’s why the currency appreciation on the back of a large amount of rapidly built up reserves has helped to boost sentiment.
Second, the deficit in the current account is very small. The current account balances the money a country earns from outside the country with what it spends. Having a big deficit would be risky as Georgia would have to borrow large sums from other places to be able to spend what it does. Since Georgia has a small deficit this isn’t a problem.
Third, the economy grows. If the economy is growing, companies are making more money, less people are unemployed, and earning more. Georgia has been developing faster than most other countries and that is positive for everyone.
It also says there are other good reasons why Georgia has this rating. The country has had a sensible attitude towards money. That means it has been moderate on how it spends money and earns it. It has not been too extravagant and has kept the economy under control.
Government debt is sustainable. Overall the country’s debt levels are low by comparison with the size of its economy. This is important, because if the debt is too high it can become a burden and leave the country exposed when it hits the fan.
Additionally, it has a strong banking sector. The banking sector is indispensable to any economy. A healthy banking sector allows for your deposits at the bank to be secure and companies to access loans in order to grow their business, and it shields the economy from unexpected shocks.
The news for normal folks is that a brighter future is a good thing. It can mean more foreign investment, which means more jobs and more money spent on roads and buildings. It can also mean the value of the currency is more stable and prices are less likely to jump up and down.
And of course no economy is without its risks. International prices, regional events and trade flows can all affect Georgia. But the latest data is encouraging, and with our rapid reserve build, our low deficit, high growth, prudent policies, low debt and secure banks, Georgia is on solid ground.
If the country will keep on conducting these activities as it does, probably in the not so distant future it will be able to upgrade its rating. And this is going to be yet another step forward for Georgia’s economy and its citizens.
