S&P Maintains Egypt's BB Credit Rating With Stable Outlook

Standard & Poor's (S&P) maintained rating of the Egyptian economy at the "BB" level in the long and short terms, while maintaining a stable outlook.

In light of the economic repercussions of the spread of the coronavirus globally, and its impact on the major global economies, the confirmation of Egypt's credit rating by the most important international rating institution "S&P" confirms the success of the Egyptian government's efforts in implementing its comprehensive program of economic reform, and that the Egyptian economy is able to absorb shocks.

Stabilizing the credit rating contributes to increasing the degree of confidence in the capabilities of the Egyptian economy, and supports attracting more foreign investments in the future, with the decline of the impact of the spread of the virus in the coming period, and also reduces the cost of funding for the government and the private sector, enabling Egypt to issue international bonds at Low interest rates.

The Egyptian government is committed to implementing important measures to support the success of the reform program, in order to support the sustainability of the unprecedented and positive performance of economic and financial indicators.

Meantime, the International Monetary Fund (IMF) expected that Egypt would be the only Arab country to achieve economic growth during 2020 in light of the repercussions of the spread of the coronavirus, yet, lowering its expectations for the growth of the Egyptian economy to 2% in 2020, 2.8% in 2021, compared to 5.6% in 2019.

It is worth noting that the Central Bank of Egypt (CBE) announced a few days ago that the core inflation rates in Egypt, according to the bank’s indicators, decreased to 1.89% in March 2020 from 1.9% in February.

The CBE put an index to measure inflation, which excluded some commodities whose prices are administratively determined, in addition to some commodities that are affected by temporary supply shocks, which will not expose their real prices and are more volatile.

In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Egypt thus having a big impact on the country's borrowing costs. The rating is also a quantified assessment of the creditworthiness of a borrower to a particular debt or financial obligation.

Credit rating means that there is a possibility that this country or an institution will not be able to pay its debts, and thus less investor confidence to purchase its bonds, which makes their investment often conditional on requesting a higher interest rate to provide loans, however when the rating is strong, interest rate on the bonds and sovereign debt decreases.