Recent deterioration in Egypt’s economic outlook has led to a sharp increase in the country’s sovereign risk profile, Moody’s Analytics said in a recent report.
The one-year External Default Frequency (EDF) for Egyptian government debt increased from 0.09% in early October to 0.18% in the week ending on 20 November, Moody’s said.
Egypt’s five-year Sovereign EDF, meanwhile, rose from a low of 0.68% to the current figure of 1.18%, the report added.
“These numbers are still comfortably below those seen in 2013 when the volatile political situation resulted in the Egyptian army taking control of the government in a coup d’état, pushing the five-year Sovereign EDF to 3.3%,” Moody’s explained.
In early November, Moody’s declared that the reforms applied to the Egyptian economy showed improvements in Egypt’s public finances and economic conditions. The ratings agency noted that there are still challenges, including the government’s large financing needs, structural economic issues such as high unemployment and inflation, and elevated political risks.
In the report, Moody’s projections reveal a GDP growth of 5% for the current fiscal year (FY) 2015/2016, up from 4.5% in FY 2014/2015.
The report said the introduction of the value-added tax, as a replacement for the current sales tax, was delayed several times, although the government aims to implement it before the end of 2015.