Egypt's stable outlook signals diversified economy, strong reform momentum: Moody's

Cairo – 19 September 2017: Egypt is benefiting from strong reform momentum and the implementation of economic and fiscal reforms underlines improved government effectiveness and policy predictability, Moody's Investors Service said in an annual report Tuesday.

Moody's said that Egypt's B3 stable credit profile reflects its large and diversified economy and strong reform momentum, though weak government finances remains a challenge.

It added that the stable outlook on Egypt's sovereign rating indicates that the country's credit strengths and challenges are balanced.

"Although Egypt's economic growth is still below pre-revolution levels, it has started to pick up, and investor sentiment has also improved on the back of strengthened reform momentum," said Steffen Dyck, a Moody's Vice President and Senior Credit Officer and co-author of the report.

"We also expect that Egypt's high fiscal deficits and government debt levels will gradually reduce," He added.

In the report entitled "Government of Egypt -- B3 stable: Annual credit analysis", Moody's said that the general government primary deficit reached 1.8 percent of GDP in fiscal year (FY) 2016/2017, down from 3.7 percent the previous year and will start to show small surpluses starting from 2019.

The rating agency forecasts a budget deficit of 10 percent in FY 2017/2018, down from 12.1 percent in 2016.

While the government expects a GDP growth of 4.2 percent in 2017, Moody's expects a further acceleration to five percent in 2019, supported by the government's structural reforms.
A credit upgrade would stem from faster-than-expected progress on the government's reform program and more rapid fiscal consolidation and improvements in debt metrics, the rating agency said.

Any signs of reform slowdown would jeopardize the stable outlook, however.
But Moody's believes that risks to policy making have declined further since mid-2016, underpinned by better co-ordination between government entities.