Moody's affirms Egypt's rating at B3, outlook stable

Moody's Investors Service has maintained Egypt's rating at B3 with a stable outlook, noting that the country has a large and diversified economy and strong reform momentum, but weak government finances continue to weigh on the rating.

The stable outlook implies that 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, Moody's Vice President -- Senior Credit Officer.

The rating agency expects Egypt's high fiscal deficits and government debt levels to gradually decrease.

Moody’s estimates that the general government primary deficit has been cut to 1.8 percent of gross domestic product (GDP) in FY17 from 3.7 percent a year earlier, ahead of showing small surpluses starting from 2019.

Egypt’s budget deficit is expected at 10 percent of GDP in FY18, higher than 9.2 percent projected by the government, but down from estimated 12.1 percent of GDP in FY16.

Real GDP growth is forecast to stand at 4.2 percent this year and 5 percent in FY19, backed by the government's structural reforms. 

"Positive pressure on the rating would stem from faster-than-expected progress on the government's reform program, more rapid fiscal consolidation and improvements in debt metrics," Moody's added.

Any signs of reform slowdown, however, would jeopardize the stable outlook.