Standard and Poor's (S&P) has kept Egypt's credit rating in domestic and hard currencies at B level and maintained its stable outlook. Minister of Finance Mohamed Maait said on Saturday the decision reflects the confidence of international institutions and credit rating corporations in Egypt's economy to deal adequately with COVID-19 crisis, according to a statement. Maait added the economic, monetary and fiscal reforms Egypt has adopted since November 2016, which were supported by the public over the past years, helped achieve that level and provided a great deal of strength for the economy to cope with internal and external economic shocks and challenges. The minister explained that the S&P decision shows the positive analysis of the institutions for the fiscal and economic policies that Egypt adopts to tackle the current crisis and the existence of a balance in policies and measures that Egypt follows to support the affected groups and sectors without taking actions that could hinder Egypt's economy from recovering. He added that the supportive policies which the government and the Central Bank of Egypt (CBE) have applied help the country to stay away from crises that could threaten the stability of the economy. Maait said that S&P report about Egypt's economic activity praised the country's corporate mechanism and its rapid response and efficiency regarding the COVID-19 crisis. He emphasised that Egypt is in a better position relatively compared to other countries with the same credit rating. He clarified that S&P pointed out that Egypt has adopted a proactive policy for managing the crisis through providing the two percent of GDP financial package in order to support the national economy, and referred to the coherence of the fiscal and monetary policies in managing the liquidity and keeping the reform trajectory of the economy. Deputy minister of financial policies Ahmed Kojok said that the largest international credit rating institutions have revised their assessments and credit ratings for around 47 countries since the beginning of March. He added that they downgraded and revised the credit rating of more than 35 countries, 11 percent of which located in MENA and North Africa, keeping the credit ratings of 12 countries, including Egypt. Kojok said these institutions have not advanced the credit rating for any country since the beginning of the COVID-19 crisis, adding that Egypt is one of two countries in MENA and North Africa the credit rating and stable outlook of which were kept. He added the S&P report expects a decline in Egypt's domestic growth rates over the short term with a pressure on the public financial indices, debt, and payment balance performance. However, these repercussions can be contained, especially that S&P analysts and experts expect the return of these advancement and the positive trajectory of these indices by fiscal year (FY) 2021/22. The report said there are several alternatives for the government to finance its monetary and external needs through global bonds markets and international and regional institutions, including the World Bank, the International Monetary Fund, and the African Bank for Development. S&P projects the increase of the trade balance deficit in FY 2020/21. Nonetheless, it praised the volume of Egypt's international reserves and its ability to cover the imports of commodities and services for the next five or six months. The report found that Egypt's economy has witnessed an economic slowdown, expecting the public budget deficit to hit 8.3 percent of GDP in FY 2019/20 and debt to decline to 89 percent of GDP in June 2020, down from 90.2 percent in the previous fiscal year. The report assured Egypt's ability to decrease the debt to GDP ratio as of FY 2021/22, after the end of the supportive financial measures that have been taken recently to contain COVID-19, the return of the economic activity to its normal averages, and the decrease of the public debt cost. It also projected that Egypt's economy will grow by 2.8 percent in 2020 due to the negative impact of the coronavirus on the tourism sector, and the energy sector to decline because of foreign investment outflows over the short term. The report showed that the global economy is expected to shrink by 2.8 percent during the current fiscal year due to the drop in economic activity in the US and European Union (EU) countries by 5.2 percent and 7.3 percent, respectively. Yet, Egypt's economic activity is expected to recover as of the second half of 2021, driven by consuming rates' improvement and the recovery of public and private investment values, according to the report. S&P praised Egypt's efforts in implementing structural reforms including the exports support programme, industrial land allocation mechanism upgrading, and the Initial Offering Programme (IPO) that aims at offering state-owned enterprises in the stock market, which will help in the rapid recovery of economic activities, supported by the private sector over the medium term.
