S&P Global Ratings follows Moody’s in recognizing Egypt’s economic turnaround, upgrading the country’s credit outlook from stable to positive. This positive revision stems from decisive actions by Egyptian authorities to address macroeconomic imbalances and a recent surge in foreign direct investment.
S&P’s confidence hinges on Egypt’s commitment to a market-driven exchange rate system. This shift, combined with the recently secured IMF package, is expected to accelerate GDP growth and bolster the government’s fiscal consolidation efforts.
Here’s a breakdown of the key factors driving the positive outlook:
- Determined Reforms: The Egyptian government’s proactive approach to tackling economic imbalances is seen as a positive step towards long-term stability.
- Foreign Investment Boost: A significant rise in foreign investment injects much-needed capital into the Egyptian economy.
- Improved FX Situation: Recent measures, including the central bank’s decision to float the Egyptian Pound (EGP), are expected to ease foreign currency shortages and boost investor confidence.
The positive outlook opens the door for potential credit rating upgrades in the future. S&P identifies faster-than-expected improvements in government and external debt positions, alongside a reduction in foreign exchange restrictions, as key factors that could lead to a rating hike.
However, S&P warns that a return to a stable outlook remains a possibility if the government’s commitment to reforms weakens and economic imbalances re-emerge.
While S&P and Moody’s acknowledge Egypt’s progress, Fitch Ratings maintains a stable outlook for the time being. The agency requires further assessment of the implemented reforms’ impact on public finances before considering a rating upgrade.
