A negative outlook means the possibility of a credit rating downgrade
Fitch Ratings has revised its outlook for the Egyptian economy from stable to negative, citing a deterioration in the country's external liquidity position and reduced prospects for bond market access.
Despite this, Fitch Ratings maintained Egypt's Issuer Default Rating (IDR) at "B+,” according to a statement.
A negative outlook means the possibility of a credit rating downgrade.
The ratings agency pointed towards poor liquidity and funding risks amid the possibility of increasing global pressures on the Egyptian economy as part of their reasoning.
The decline in Egypt's foreign exchange reserves from $40 billion last February - before the outbreak of the war in Ukraine - to $32 billion last October, contributed to the adjustment of the assessment, according to a Fitch report.
“The drop in external liquidity has been driven by outflows of non-resident investment in locally-issued government debt, which dropped to about $13 billion by September 2022, from over $17 billion in March and over $30 billion in 2021,” it stated.
“Egypt's 'B+' ratings reflect support from bilateral and multilateral partners. In addition to the $13 billion in GCC deposits received in March, which may be converted into longer-term investments, Egypt is expecting further investments from the GCC, with a total of $3.6 billion of equity acquisitions finalized so far in 2022. Egypt has performed well on past IMF programs,” it added.
Fitch recently increased its projections for Egypt’s 2022 real GDP growth to 6.59%, making it the fourth month in a row that the agency has upped its forecast for the country.
