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S&P Affirms BB+/B’ and ‘BBB-/A-3 Ratings on Egypt

As inflationary pressures ease, the sharp deterioration in external demand now poses the principal threat to Egypt’s creditworthiness. Standard & Poor’s expects economic growth to fall to around 5.5pc in fiscal 2009 (ending June30, 2009) and 4.4 per cent in fiscal 2010, from an average of 7 per cent in the past three years, because of a slowdown in tourist arrivals, static workers’ remittances, and weakening demand for manufacturing exports. “Slower growth will, in turn, put pressure on public finances and we expect the general government deficit to widen slightly to 7.9 per cent of GDP in fiscal 2009. Compounded by a fall in traffic passing through the Suez Canal, we believe the current account will register a deficit of 2pc of GDP in fiscal 2009, widening to 3.4pc in fiscal 2010, following years of surpluses.” Inward foreign direct investment will likely decline (albeit from a strong 8pc of GDP in fiscal 2008) while substantial net outflows from the debt and equity markets have already occurred.

· business@khaleejtimes.com