Another upgrade FITCH Ratings has revised its outlook on Egypt's long-term foreign and local currency Issuer Default Ratings (IDRs) to stable from negative and kept these at B-. This is the first time that the international credit rating agency has upgraded the county's economic outlook since the 25 January Revolution. Fitch has meanwhile also kept the country's long-term foreign and local currency sovereign credit ratings at B- and kept the short-term foreign currency credit at B. According to a Fitch report, the revision of the outlook reflects the significant financial aid Egypt has received from the Gulf states, which has eased the pressure on the reserves, the exchange rate and the budget and boosted business confidence. The agency also referred to the rise in Egypt's international reserves and a decrease of foreign debt to 18.9 per cent of GDP. It added that the political scene had been calmed by the crackdown on the Muslim Brotherhood and restrictions on protests. The latter have now become smaller and rarer, and the state of emergency and curfew were lifted in mid-November 2013. The agency said that while a referendum on the country's new constitution in January was intended to pave the way for presidential and parliamentary elections later in 2014, serious political tensions remained, however. Fitch said that society was deeply polarised, political parties were weak and the security situation in North Sinai had worsened. Fitch forecasts real GDP growth to pick up to 3.2 per cent in 2013/14 and 3.8 per cent in 2014/15, from 2.1 per cent in 2012/13, although these rates are weak compared to pre-Revolution levels of 6.2 per cent and will be insufficient to prevent unemployment from rising. Standard & Poor's, another international ratings agency, raised its long- and short-term foreign and local currency sovereign credit ratings in November, with a “stable” outlook for Egypt. Confidence in Egypt ALMOST half of a sample of Middle East-based fund managers expect to raise their equity allocations to Egypt in the next three months, while none plan to reduce their investments, according to the latest monthly Reuters survey of leading fund managers in the region. Forty-seven per cent of 15 managers said they were likely to put more money into Egyptian equities, up from 33 per cent in November. All the other managers expected to keep their Egyptian investments steady for the first time since the survey was launched in September. Moreover, the survey showed that out of the six major Middle Eastern stock markets covered by the survey, funds were in general most bullish about Egypt. Despite the continuing political unrest, most fund managers are assuming that a deterioration in public security will be avoided and are focusing instead on signs that billions of dollars worth of aid from the Gulf states will start to revive the Egyptian economy, allowing the government to carry out large economic stimulus plans. Egypt's main stock index, the EGX30, was up by 24 per cent in 2013, having regained levels last seen in January 2011 before the ouster of former president Hosni Mubarak led to more than two years of political and economic instability. The results of the survey indicate growing optimism about a recovery in the Egyptian economy despite the political uncertainty. Best in 30 years DECEMBER saw the highest rates of connecting residential units with natural gas in 30 years, amounting to 80,000 units, the Petroleum Ministry said in a statement this week. Taher Abdel-Rehim, head of the Egyptian Natural Gas Holding Company (EGAS), attributed the increase to the provision of the funds needed to implement the ministry's plans, which are to connect 800,000 residential units with natural gas during the current financial year at a total investment of LE1.5 billion. Abdel-Rehim added that the ministry would work on increasing connection rates over the coming period in order to alleviate the burden of people having to obtain butane gas cylinders. The substitution of such cylinders with natural gas would also help reduce the subsidies directed to butane gas in the state budget, he said. The total number of residential units connected with natural gas reached 5.8 million last December. New petroleum pacts INTERIM President Adli Mansour has issued decrees approving eight new agreements for oil and gas exploration with investments worth $1.2 billion. Seven of the agreements, made by the Egyptian Natural Gas Holding Company (EGAS), were with Emirati, Italian, English, Irish and Canadian companies, in addition to a further amended existing agreement. The new agreements are set to search for oil and gas in the Mediterranean, the Nile Delta and the Gulf of Suez. These areas were selected by EGAS for the drilling of a minimum of 17 new wells during a three-year period of research. Mansour had previously issued 21 decrees for petroleum agreements for oil and gas exploration with international companies, with investments of a minimum of $713 million and the drilling of 109 wells. In November, Minister of Petroleum Sherif Ismail signed nine crude-oil and natural-gas exploration agreements in the Gulf of Suez, Sinai and the eastern and western deserts that required minimum investments of $470 million and the drilling of 15 wells. Banning tuk-tuks? THE STATE commission has issued a recommendation to the Administrative Court to ban the import of three-wheeler tuk-tuks into Egypt. The decision came as a result of a lawsuit filed by activist Hamdi Al-Fakharani, who based his argument on the negative impact of the three-wheelers on security and safety, child labour and the environment. While the recommendation is non-binding, car market analysts believe that if implemented it will have an adverse effect on the Ghabour Auto Group, which is the sole distributor of the three-wheelers in Egypt. The latter represented 12.2 per cent of the company's revenues for the first nine months of 2013. Ghabour also generates high margins through the sale of the three-wheelers via its financing arm Mashroe. “Any possible ban by court order will hit Ghabour Auto's bottom line and gross margins,” noted a Pharos Brokerage research note. As a result of the assumption that the three-wheelers could be banned from 2015, the company's value fell by 24.7 per cent in Pharos Brokerage estimates, also taking into consideration the expected slowdown in the financing business revenue growth. Ghabour Auto told analysts that a court hearing had not yet been scheduled and it did not expect a ruling in the short term. It said it was a strong believer in the importance of three-wheelers in Egypt, particularly in low-income areas where they are the most important mode of transport.
