In terms of Egypt’s external position, Fitch expects it to stay weak as the conflict continues to drive risk aversion towards emerging markets, which may make it more difficult for the return of portfolio returns
Fitch Ratings has downgraded its forecast for Egypt’s real GDP growth for the upcoming fiscal year (FY) of 2022/2023, pushing it down to 4.9% from 5.5% as the first international rating institution to do so since the start of the Russia/Ukraine conflict.
The international ratings agency attributed the change to the conflict’s impact, explaining that it will affect Egypt in terms of the higher commodity prices, disruptions to wheat supply, lower tourist inflows, and increased risk aversion towards emerging markets.
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“Soaring inflation and monetary tightening will weigh on private consumption, while a rising subsidy bill and debt servicing costs will force reductions in capital expenditure,” it wrote in its monthly updated report on the Middle East and North Africa’s (MENA) outlook.
“Worsening economic conditions in Egypt, amid soaring inflation and weaker economic growth, will increase social discontent,” it added.
In terms of Egypt’s external position, Fitch expects it to stay weak as the conflict continues to drive risk aversion towards emerging markets, which may make it more difficult for the return of portfolio returns.
This is despite support from GCC countries Saudi Arabia, UAE and Qatar which funneled around $22 billion into the country, as well as Egypt’s efforts towards brokering with the International Monetary Fund (IMF).
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“Given this backdrop, we believe that authorities will increase their efforts to secure bilateral and multilateral funding while attracting foreign investment to cover the country’s external financing needs,” Fitch explained in its report.
