With a stable outlook for the third time in a row, the credit ratings agency that they “see strong medium-term growth prospects for Egypt..."
Showing its confidence in the Egyptian economy, Standard & Poor (S&P) Global Ratings has maintained the country’s rating of “B” for long- and short-term foreign and local currency sovereign credit ratings.
With a stable outlook for the third time in a row, the credit ratings agency that they “see strong medium-term growth prospects for Egypt, barring the pandemic's near-term impact, underpinned by the ongoing implementation of fiscal and economic reforms”.
Egypt’s gross domestic product (GDP) growth will start to rebound from 2022 onward, according to S&P Global.
They added that Egypt's foreign exchange reserves and access to domestic and foreign debt markets will allow the government to cover high external financing needs and upcoming maturities.
Egypt’s GDP growth is forecast to slow to 2.5 percent in fiscal year (FY) 2020/2021, compared to 3.6 percent in FY19/20 “as the impact of the pandemic is felt more fully.” The economic growth is expected to average 5.3 percent from FY21/22 to FY23/24.
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S&P does expect that external and government debt metrics will deteriorate during the current fiscal year, mainly as a result of pressures on the country’s key sources of hard currency, “followed by gradual improvement.”
Two of the country’s biggest sources of hard currency, the tourism sector and the Suez Canal, will continue to see pressure with S&P forecasting tourism revenues to recover to pre-pandemic levels in 2023.
Both Minister of Finance Mohamed Maait and Minister of Planning and Economic Development Hala El-Said released statements regarding the new ratings.
International financial institutions remain confident in Egypt’s ability to deal positively with the novel coronavirus (COVID-19) pandemic, said Maait, adding that according to the estimates of S&P’s latest report, the Egyptian economy can overcome the negative repercussions of the pandemic.
This is due to the improvement of major economic indicators, such as the stability of public finances, and the existence of a large and reassuring foreign exchange (FX) reserves.
El-Said noted that the rating showcases the Egyptian economy’s ability to emerge from a global crisis with positive growth rates.
Credit ratings are an important tool that investors use when making decisions to buy bonds and other fixed income investments, she added, saying that these indicate the minimum return that investors demand.
