S&P: Egypt unaffected

Standard & Poor's said in a report stress-tests on economic indicators, together with the experience after the 1997 Luxor attacks, suggest that the recent bombings in Egypt will not have a significant effect on sovereign creditworthiness.

Nevertheless, policy responses by the Egyptian government will be important for determining the ratings going forward, the agency noted.

The article on the Arab Republic of Egypt (foreign currency BB+/stable/B, local currency BBB-/stable/A-3) is titled "Egypt After The Bombings: Stress-Testing Sovereign Creditworthiness."

"Speculation about the impact of the bombings on the wider Egyptian economy and government finances is only natural, given that tourism accounts for about 20% of the country's annual foreign currency receipts," said S&P credit analyst Farouk Soussa.

"Nevertheless, a closer look at the economic effect of the 1997 attacks in Luxor suggests that fears of a significant deterioration in Egypt's economic fundamentals and thus its creditworthiness, may be exaggerated."

This assessment is reinforced by a simple scenario analysis exploring the effects of a fall in tourism receipts today on Egypt's external and fiscal balances, as well as on its economic growth. S&P said it sets out a pre-bombing base case and three scenarios under which tourism receipts fall by 10%, 25% and 50%, respectively.

With regard to the fiscal balance, S&P said it pre-bombing base case envisaged a deterioration in the government's finances, owing to recent tax reforms aimed at increasing the competitiveness of the Egyptian economy and raising output by lowering income and corporate tax rates and customs duties.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.