International institutions renew confidence in the Egyptian economy’s ability to confront COVID19.

• Egyptian economy’s unique performance gets ahead of most of the corresponding countries during the past year.
• Large and diversified scale of Egyptian economy has shown its flexibility during the world health crisis.
• Keeping on Fitch credit rating reflects effectiveness and balance of the economic and financial policies during the past years.
• A package of structural reforms are to be implemented to enhance growth rates and boost private sector partnership.
• Fitch expects Egyptian economy to achieve growth rates at 3% at present fiscal year and 6% in the coming year.

 

Minister of Finance deputy:

• Economic effect of the pandemic is less severe while compared to other countries and emerging markets.
• Fitch Stable Outlook reflects positive improvement for current account revenues and sustainability of the Egyptian economic growth rates in the medium term.

Dr. Mohamed Maait, minister of finance, assured that “Fitch” decision to maintain the Egyptian credit rating as it is (+B) with a stable future outlook, in both foreign and local currencies without any modification, is a reflection of international institutions’ confidence, especially credit rating institutions, in the resilience of the Egyptian economy and its ability to positively deal with Corona crisis and overcome its internal and external repercussions.   

This is achieved thanks to the Egyptian government’s continuous efforts to implement financial, economic and monetary reforms so as to improve business environment and guarantee stability of the public finance, besides improving the competitiveness of the Egyptian economy.  

The minister remarked that Fitch report of maintaining Egypt’s credit rating was supported by the generated confidence resulting from the financial and economic reforms executed during the past years, in addition to the diversity and magnitude of Egyptian economy that showed flexibility during the world health crisis resulted from COVID19.

According to Fitch report, the Egyptian economy’s unique performance exceeded the economic performance of most of the corresponding countries during the past year; this was due to the Egyptian government’s rapid response to meet the needs of health sector dealing effectively with the status and controlling death and infection rates, the minister added.

Moreover, Fitch decision to maintain the credit rating reflects the Egyptian government’s effectiveness and balanced financial and economic policies during the past years, which resulted in achieving good and stable growth rates. The solidity of the Egyptian economy against economic crises reflected the government policy in dealing with the current world health crisis in a rapid and flexible way, the minister noted.

The government aims at continuing the financial and economic reforms through executing a package of structural reforms to enhance growth rates and public-private partnership, strengthen governance and monitoring systems for economic performance, and to improve business climate, the minister clarified.

Fitch expects the Egyptian economy to achieve positive growth rates at 3% this FY in spite of its expectation of a declining touristic rate and a drop in business activities on the back of the consequent impact on the world trade movement; the fact that assures the diversity of economic sectors and Egyptian economy solidity, stated Dr. Maait. 

Moreover, Fitch expects the Egyptian economy to continue achieving high growth rates in the medium term to reach real growth rate of 6% in FY 2021/2022 by reactivating Egyptian touristic activity and commercial traffic. 

Besides, Fitch expects that Egypt  succeeds in controlling inflation rates to achieve an average annual growth rate of 5% in 2021, and to continue increasing banking sector lending for private sector activity in order to achieve annual growth rate of 20% during 2021, Dr. Maait stressed.

Minister deputy for fiscal policies, Mr. Ahmed Kouchouk, stated that Fitch report clarified effects of Corona pandemic on the ratio of public debt rates to GDP, compared to what happened in most of the emerging and even developed countries.  Besides, the report marked the fact that government public debt rates will continue decreasing, as a percentage of GDP in the medium term, starting from  FY 2021/2022. 

Fitch also   expected that public budget will reach a deficit of 8.5% of GDP during that current fiscal year, with a further drop in the coming years.  These expectations were in light of the government obligation to continue reform plans and to  support economic activity and growth rates through funding and applying package of preventive economic procedures to support the most affected sectors and neediest categories, with total costs of 2% of GDP.

Minister deputy clarified that Fitch report highlighted the government efforts in rationalizing spending to increase revenue to GDP ratio during the coming four years in order to fund targeted development programs.  Moreover, it focused on the ability of Egyptian government to overcome current and potential challenges resulted from structural and economic reforms executed during the past years as well as the currently executed reform plans, which granted Egyptian economy high scale of flexibility to confront external crisis as compared with the same or top credit rated countries.

 Dr. Maait added that providing local and broad financing base supported by a high satisfactory balance of foreign exchange reserves are considered strong elements to support the Egyptian economy, underlining Egypt’s stable outlook that reflects the gradual improvement of current account revenues and the sustainability of the Egyptian economic growth rates in the medium term.

Fitch report stated that the most important factors to raise Egypt’s medium-term credit rating rely in resuming monetary control efforts and decreasing debt rates to GDP; besides enhancing structural reforms to improve business environment and boost private partnership in the Egyptian economy, hence, continuing to achieve real economic growth rates that exceed the expectations of Fitch institution, the deputy noted.