Stan­dard and Poor’s af­firms Egypt’s B/B- rat­ing, out­look re­mains sta­ble

The Daily News Egypt - - Front Page - By Mo­hamed Samir

US based credit rat­ing agency Stan­dard and Poor’s (S&P) on Fri­day af­firmed its “B/B-” long and short-term for­eign and lo­cal cur­rency sov­er­eign credit rat­ings for Egypt, with a sta­ble out­look.

Ac­cord­ing to the state­ment, the sta­ble out­look re­flects the bal­ance be­tween the risk of large fis­cal and ex­ter­nal deficits in Egypt against the fi­nan­cial sup­port from the IMF pro­gramme, in ad­di­tion to the adopted re­form pro­gramme that aims to ad­dress struc­tural bal­ances.

More­over, the state­ment cites that af­ter ob­serv­ing a slow­down in growth in the first half of fis­cal year (FY) 2016/2017, S&P has low­ered its es­ti­mate of Egypt’s real GDP growth to about 3.8%, down from 4.3% in FY 2015/2016.This re­flects the author­ity’s tight fis­cal and mone­tary stance and slug­gish do­mes­tic de­mand. Egypt’s real GDP is pro­jected to con­tinue to grow at a mod­er­ate rate of just un­der 4% on av­er­age from 2017-2020.

S&P an­tic­i­pates grad­ual fis­cal con­sol­i­da­tion to con­tinue, sup­ported by the 1% in­crease in VAT from 13% to 14% and a re­duc­tion in pub­lic ex­pen­di­tures. Ac­cord­ing to the state­ment, Egypt’s fis­cal deficit is pro­jected to de­cline to around 8.6% from the cur­rent 12% in the 20172020 pe­riod.

On the other hand, the frag­ile se­cu­rity and so­cio-politi­cal en­vi­ron­ment in Egypt re­mains frag­ile. In ad­di­tion to the fact that 26% of the pop­u­la­tion lives in poverty, the 13% un­em­ploy­ment and the pub­lic dis­con­tent due to the ris­ing cost of liv­ing are the main risks to the eco­nomic re­forms. How­ever, the author­i­ties have as­serted that so­cial pro­tec­tion and tar­geted com­pen­satory measures are an es­sen­tial part of the fis­cal con­sol­i­da­tion pro­gramme, ac­cord­ing to the state­ment.

The state­ment con­cludes that if GDP growth ex­ceeded the fore­casted lev­els, and if Egypt’s fis­cal and ex­ter­nal po­si­tions were im­proved, the rat­ings would be raised.

S&P low­ered its es­ti­mate of Egypt’s GDP growth to roughly 3.8%

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