S&P cuts Egypt credit outlook to stable on lower Gulf support

The outlook on Egypt’s credit rating was cut Friday to stable from positive by Standard & Poor’s amid expectations that the country’s external imbalances will persist as it may receive reduced financial support from the Arab Gulf countries.

The S&P kept its long-term credit rating at B-. Egypt’s economic recovery is expected to remain gradual and to depend on maintaining security and political stability, the ratings company said in a statement.

“The stable outlook reflects our expectation that Egypt will largely remain politically stable, its economy will continue to progressively grow in the face of important macroeconomic headwinds, and that fiscal deficits will improve but remain at high levels,” S&P analysts including Nourredine Lafhel in Dubai said in the report. “The economic recovery is supported by improved political conditions, a recovery in construction, manufacturing, services, and tourism.”

Saudi Arabia, the UAE, Kuwait, and Oman pledged $12.5 billion in economic and financial assistance to Egypt during the Economic Development Conference held in Sharm el-Sheikh in early 2015. However, lower oil prices may force the GCC countries to cut their aid.

Growth in Egypt’s real gross domestic product will accelerate to 4.2 percent in 2015, twice the average rate for the past three years, the S&P said. Economic expansion will remain at about 4 percent on average per year in 2016-2018, propelled by domestic consumption and investments.

Source: Bloomberg