The key uncertainty for Georgia and the region in 2021 is the dynamics of the pandemic - Fitch Ratings said in a recent Fitch Ratings 2021 Outlook for Emerging Europe Sovereigns.
Fitch Ratings draws on the fact that most countries in the region renewed lockdowns in 4Q20, and these also seem set to be a feature of 1Q21.
“In general, the latest wave of restrictions is more targeted than earlier in 2020 and is likely to have a much less economic impact; this base effect underpins the forecasted rebound in growth in all sovereigns in 2021” – the Outlook reads.
Fitch assumes that there will be significant progress towards a medical solution next year, but it will not be until 2022 that such a solution will materially affect global economic growth.
“Uncertainties remain over the pandemic’s medium-term impact on growth, notably through any reconfiguration of supply chains and labor market hysteresis. The rebound in growth and reduced fiscal-support measures will underpin a narrowing of general government deficits in 2021” – The Outlook reads.
However, Fitch assumes that policy will remain accommodating and it does not expect significant fiscal consolidation.
“We forecast the median deficit for the region at 4% of GDP in 2021, down from a long-term high of 7% in 2020. As the year progresses, we will watch for national plans on how to contain the growth of public debt/GDP and place it on a downward path over the medium term. There was not a meaningful reduction in debt for the region in recent years, despite generally strong economic growth; general government debt/GDP was stable between 2015 and 2019 before jumping by 11pp in 2020 to close to 50%, where it is expected to stay in 2021” – Fitch Ratings said.
