S&P's retains a positive outlook for the Egyptian economy
Standard & Poor's confirms Egypt's credit rating for the second time in three months. Ahmad Abdul-Rahman explains the latest outlook for the Egyptian economy.
The global rating agency, Standard and Poor's (S&Ps) praises efforts by the Egyptian government to rationalise expenditure and expand its social protection programmes. It expects the country to achieve 4 per cent growth over the next three years and USD 10.7 billion in revenue from tourism.
Egyptian Minister of Finance, Mohamed Maait, praised the decision taken by the global rating agency to keep Egypt's credit rating in both local and foreign currencies unchanged at "B", while also maintaining a stable outlook for the Egyptian economy for the second time in three months. Maait said that this decision is a new international certificate of confidence that the Egyptian economy has begun to recover from the repercussions of the exceptional global and domestic economic situation that occurred over the past year, which included the Russian-Ukranian war and the negative effects of the Covid-19 pandemic.
In a press statement issued a few days ago, Maait also said that Egypt has succeeded in taking a balanced and integrated approach to making its decisions and implementing reforms. These have been reflected in the fact there is full coordination between the government and the Central Bank of Egypt (CBE), the statement said. Maait explained that Egypt is implementing a national economic reform programme to ensure stable economic conditions, maintain financial discipline and increase the competitiveness of the Egyptian economy.
In its latest report, the Minister of Finance also stated that Standard & Poor's highlighted its expectation that financial discipline will continue during the current fiscal year. He said that in the last fiscal year, the total deficit amounted to 6.1 per cent of GDP, down from 6.8 per cent in the 2020/2021 year. The country also achieved a primary surplus for the fifth year in a row which amounted to 1.3 per cent of GDP in the fiscal year 2021/2022.
The minister said that the report praised the government's efforts to rationalise expenditures and expand the social protection network as well as the programmes adopted by the Ministry of Finance to mitigate the effects of the global crisis. Standard & Poor's expects that over the next three years, Egypt's economic growth rate will average around 4 per cent annually, driven mainly by strong growth in the construction and energy sectors. This is in addition to the continued strong growth of sectors such as information and communication technology, wholesale and retail trade, manufacturing, agriculture, and health.
The minister also said that the report includes expectations of a decline in the value of the current account deficit in nominal terms until 2026. The flexibility of the exchange rate and its positive impact on increasing the competitiveness of exports in the Egyptian commodity and service sector helped enormously. The tourism and energy sectors also performed strongly, especially natural gas, whose monthly revenues have reached about USD 700 million
The report also referred to the significant improvement in the indicators of the current account balance for the fiscal year 2021/2022, as the proceeds of non-oil exports increased by 29 per cent annually. This was mainly an increase in exports of fertilizers, medicines and ready-made clothes. A large surplus was achieved on the petroleum trade balance, amounting to USD 4.4 billion, because of the expansion of natural gas exports.
The minister commented that the report praised the increased revenues of the Suez Canal, which are the highest in its history, and amounted to USD 7 billion in the fiscal year 2022. It is expected to reach USD 8 billion in 2023.
He also said that tourism sector revenues increased significantly over the past year, achieving revenues of USD 10.7 billion, as it recovered from the COVID-19 pandemic. The tourism sector also saw visitors from a greater number of countries such as the Arab Gulf countries, Germany and Poland.
Foreign direct investment also increased with proceeds for the last fiscal year up 71 per cent compared to the previous one. They reached USD 9.1 billion in 2022, compared to about USD 5.2 billion in 2021.
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