Egypt is the only country in the Middle East and Africa (MEA) region to maintain its credit rating with a stable outlook at the big three rating agencies, according to Minister of Finance Mohamed Maait.
The three credit rating agencies are Standard & Poor’s, Moody’s, and Fitch Ratings.
The minister’s comments came following Fitch Ratings affirming, on Monday, Egypt’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at ‘B+’ with a stable outlook.
“Egypt’s ratings and outlook are supported by a recent track record of fiscal and economic reforms, policy commitment to furthering the [government’s] reform programme, and the ready availability of fiscal and external financing in the face of the COVID-19 pandemic,” Fitch said in its report. “The ratings are constrained by still large fiscal deficits, high general government debt/GDP and weak governance scores, as measured by the World Bank governance indicators, which underline political risks.”
Maait said that Fitch’s decision to maintain Egypt’s credit rating re-emphasises the confidence international institutions, particularly credit rating agencies, have in the country’s economy.
This is particularly in light of the Egyptian economy’s ability in dealing positively with and overcoming the novel coronavirus (COVID-19) crisis, due to the economic, monetary, and financial reforms adopted by the government.
According to Fitch, the reforms in recent years have provided Egypt, at its current rating, with a degree of flexibility to weather shocks. Nonetheless, the pandemic still presents risks to the country’s credit metrics depending on the duration of the global health crisis.
Fitch expects Egypt’s GDP to stand at 2.5% in fiscal year (FY) 2020/20, well below the average growth rate of 5.5% in FY 2018/19 and FY 2019/20. The credit ratings agency noted that GDP will recover in FY 2021/2022 to 5.5%, before averaging at over 5% in the medium term.
The recovery will come on the back of the return of tourism to Egypt, growth in the energy and manufacturing sectors, and improvements in the business environment.
“Meanwhile, we forecast average inflation of 6.0% in 2020 and 7.5% in 2021, with the country’s budget deficit to widen to 9.5% of GDP in FY 2020/21 from 8.8% in FY 2019/20,” Fitch added.