Fitch Ratings on Thursday upgraded Georgia's long-term foreign and local currency issuer default ratings to 'BB-' from 'B+', highlighting the ex-Soviet state's improved macroeconomic stability.

"The outlooks on the ratings are Stable," it said in a statement.

"The upgrade reflects Georgia's strong growth performance, the government's progress in reining in the fiscal deficit, a reduction in inflation and rise in foreign exchange reserves."

Vato Lejava, a senior economic advisor to the Georgian prime minister, told AFP that the upgrade was "a logical consequence of positive trends in Georgia's economy which we achieved thanks to the improved investment and business environment."

The agency also upgraded Georgia's Country Ceiling to 'BB' and affirmed the short-term foreign currency issuer default rating at 'B'.

The rating on senior unsecured debt was upgraded to 'BB-' from 'B+'.

The agency said however that both domestic and external factors continue to weigh on the ratings -- among them "a low risk" of resumed hostilities with arch-foe Russia and a potential increase in domestic political risks in 2013, when Georgia's current President, Mikheil Saakashvili, is due to step down after two terms in office.

The once booming Georgian economy was hit by the country's 2008 war with Russia and the global economic downturn, but has since recovered strongly to grow 6.0 percent in 2011, to be followed by 5.0 percent next year, according to government estimates.

After coming to power in 2004, Saakashvili, a supporter of small government and deregulation, introduced a number of liberal reforms boosting growth and activity in the country of 4.6 million.

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