EGYPT – Egypt has been able to maintain its credit rating at B+ with stable out look despite the country undergoing a difficult and challenging economic time occasioned by the raging COVID-pandemic and an oil price crash.
Fitch Ratings, one of the Big 3 credit rating agencies affirmed Egypt’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a Stable Outlook noting that the rating and outlook was supported by a recent track record of fiscal and economic reforms.
Fitch Rating further noted that Egypt’s policy commitment to furthering the reform program and ready availability of fiscal and external financing in the face of the COVID-19 pandemic also contributed to the positive rating.
The ratings agency however noted that Egypt credit position was still constrained by large fiscal deficits, high general government debt/GDP and weak governance scores (as measured by the World Bank governance indicators).
This factors according to Fitch Rating underline presence of political risks which might affect the country’s credit rating and outlook in future.
It further explained that the coronavirus shock is negatively affecting Egypt’s external finances, GDP growth and fiscal performance.
According to Fitch, the pandemic has hit Egypt’s external finances, resulting in $18 billion (5 percent of GDP) of outflows from the local currency debt market.
The pandemic according to Fitch also resulted in a loss of tourism revenues (which were $13 billion in 2019) and likely some decline in remittance inflows (which were close to $27 billion in 2019).
Fitch expected real GDP growth to be 2.5 percent in the fiscal year ending June 2021 (FY21), well below average growth of 5.5 percent in FY18 and FY19.
“We expect growth to recover to 5.5% in FY22 and to be maintained at just over 5% in the medium term,” Fitch said.
It explained that the projection was based on the assumption that tourism gradually returns, further growth in the energy and manufacturing sectors and gradual improvements in the business environment.