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Fitch: Egyptian economy to improve with Gulf support

Egyptian economy

Cairo, (Business News Report)|| Fitch Ratings has sent a message of reassurance to the Egyptian economy that it will improve during the coming period due to the rapid Gulf support.

Fitch said that the rapid response of the Central Bank to raise interest rates, and allow the exchange rate of the pound to decline against the US dollar, will support the Egyptian economy.

The director at the credit rating agency, Krisjans Crostins, predicted that Egypt would raise interest rates by 300 basis points by the 2023/2024 fiscal year to maintain positive real interest rates, tame inflation, support the Egyptian pound and maintain the attractiveness of local currency assets.

Krustins said that Egypt has made important progress in achieving fiscal discipline and keeping the fiscal deficit under control, and that its performance in the second quarter of the 2021/22 fiscal year was good despite the large current account deficit.

Fitch maintained the long-term foreign currency issuer’s credit rating in Egypt at “B+”, with a stable outlook, stressing that Egypt’s credit rating is supported by its recent record in financial and economic reforms, remarkable growth, and strong support from bilateral and multilateral partners.

Inflation rates are likely to exceed 10% during the current fiscal year, increasing to 12% during the next fiscal year, according to Crostins, who stressed that this would force the Central Bank of Egypt to raise interest rates further.

The Central Bank of Egypt raised interest rates to large levels necessary to maintain the attractiveness of local assets, and this happened after the significant devaluation of the pound in 2016.

While the International Monetary Fund expected the real GDP in Egypt to grow by 5.9% this year, and to grow by 5% in 2023, with inflation rates rising to 11% in 2023, Fund Director Kristalina Georgieva said that the conditions of the Egyptian economy are deteriorating, a large number of people in Egypt are exposed to difficult living conditions.

Egypt enjoys a number of advantages compared to many other peer countries, including Egypt’s relationship with bilateral and multilateral partners, according to the director at Fitch.

He pointed out that Egypt has carried out many reforms since 2016, and demonstrated its ability in the past to deal with numerous external shocks, and started reducing the debt-to-GDP ratio, he said.

According to data from the Central Bank of Egypt, Egypt’s external debt has increased since 2012 by 275% to reach $145.5 billion in 2021.

That was after it amounted to $38.8 billion in 2012. The average annual increase in Egypt’s external debt in the last three years was $16 billion.

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