Tags: Egypt Credit Rating

Fitch Downgrades Egypt Outlook to Negative

Friday, 28 Jan 2011 03:55 PM

Fitch Rating on Friday revised down its outlook for Egypt, dropping it to "negative" as mass protests in the country turned violent, engulfing the capital and other cities in a serious challenge to President Hosni Mubarak's 30-year rule.

Fitch said it was holding steady Egypt's other ratings, including its long-term foreign currency issuer default rating, which was held at the investment grade BB+.

"The Outlook revision reflects the recent upsurge in political protests and the uncertainty this adds to the political and economic outlook ahead of September's elections," said Richard Fox, head of Fitch's Middle East and Africa Sovereign Ratings. Egypt is slated to hold presidential elections in the fall.

The revision comes after the Egyptian stock exchange's benchmark EGX30 plummeted about 17 percent in two days, a drop fueled by investor panic over the Tunisia-inspired protests that erupted Tuesday in the Arab world's most populous nation. The demonstrations have focused on the economic disparity in the country, spiraling food prices and the grinding poverty that afflicts nearly 40 percent of Egypt's 80 million people.

Analysts have downplayed the likelihood that President Hosni Mubarak's regime would be ousted as a result of the protests. But the mass rallies in which tens of thousands have clashed with riot police have pushed to the surface latent concerns about Egypt and raised questions about the economic impact on the country.

The unrest appears to have already hit at least one U.S. oil company. Apache Corp., which has extensive operations in Egypt, has seen it's shares slide about 7 percent, wiping out $3 billion in market value, since Thursday in a drop analysts linked to the unrest in Egypt.

But Oppenheimer & Co. economist Fadel Gheit said in a research note that the concerns about Egypt may be overblown.

"A regime change in Egypt ... could trigger a chain reaction that could put all other governments in the region at risk," said Gheit. "However, in our view, even a regime change in Egypt may not negatively impact Apache's operations as its oil and gas development projects are critical to Egypt's economic growth."

While Egypt has enjoyed respectable economic growth figures, even during the global financial meltdown, the rallies have centered on the inequality in income distribution, allegations of corruption, and the grinding unemployment some analysts have put as high as 25 percent. Egypt's GDP growth is projected at about 6 percent in 2011.

It remains unclear whether Mubarak, who has ruled Egypt for nearly 30 years, will run for a sixth term in the September presidential election. But the protests have spotlighted the popular distaste for his eventual candidacy, or the increasingly discussed possibility that his younger son, Gamal, would take over.

Fitch said that while it doesn't expect Egypt's macroeconomic outlook to be seriously affected by the protests, it noted that serious challenges remain, such as high youth unemployment and food inflation running at about 17 percent per year.

"The severity of the macroeconomic impact will depend on political developments in the days and months ahead," Fitch said in a statement.

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Fitch Rating on Friday revised down its outlook for Egypt, dropping it to negative as mass protests in the country turned violent, engulfing the capital and other cities in a serious challenge to President Hosni Mubarak's 30-year rule.Fitch said it was holding steady...
Egypt Credit Rating
508
2011-55-28
Friday, 28 Jan 2011 03:55 PM
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