Belfast Telegraph

Thursday 21 August 2014

Egypt economy rating downgraded as mass protests gather pace

CAIRO, EGYPT - JANUARY 30: An anti-government protester cries during Islamic prayers in Tahrir Square at sundown January 30, 2011 in Cairo, Egypt. Cairo remained in a state of flux and marchers continued to protest in the streets and defy curfew, demanding the resignation of Egyptian president Hosni Mubarek. As President Mubarak struggles to regain control after five days of protests he has appointed Omar Suleiman as vice-president. The present death toll stands at 100 and up to 2,000 people are thought to have been injured during the clashes which started last Tuesday. Overnight it was reported that thousands of inmates from the Wadi Naturn prison had escaped and that Egyptians were forming vigilante groups in order to protect their homes. (Photo by Chris Hondros/Getty Images) *** BESTPIX ***
CAIRO, EGYPT - JANUARY 30: A man in Tahrir Square holds a piece of paper with a drawing of President Hosni Mubarak on January 30, 2011 in Cairo, Egypt. As President Mubarak struggles to regain control after five days of protests he has appointed Omar Suleiman as vice-president. The present death toll stands at 100 and up to 2,000 people are thought to have been injured during the clashes which started last Tuesday. Overnight it was reported that thousands of inmates from the Wadi Naturn prison had escaped and that Egyptians were forming vigilante groups in order to protect their homes after Police were nowhere to be seen on the streets. Broadcasts from the Al-Jazeera television network via an Egyptian satellite have now been halted. (Photo by Peter Macdiarmid/Getty Images)
Egyptians protestors clash with anti-riot policemen in Suez, Egypt, Thursday, Jan.27, 2011. Egyptian activists protested for a third day as social networking sites called for a mass rally in the capital Cairo after Friday prayers, keeping up the momentum of the country's largest anti-government protests in years. (AP Photo)

Standard & Poor's has downgraded its rating on Egypt and warned that another cut was possible as a week of anti-government protests has almost crippled the nation and ground the economy to a virtual standstill.



S&P became the third international ratings agency in under a week to downgrade Egypt because of the unrest.

Demonstrators have focused their anger on President Hosni Mubarak - a leader they say is sorely out of touch with their daily economic plight.

Egypt's long-term foreign currency sovereign rating was lowered to BB from BB+, S&P said.

The cuts still left the rating within the investment grade category, but reflected the increasing alarm with which investors are viewing the developments in Egypt.

S&P warned that it could issue another downgrade - possibly by more than one notch - within the next three months.

"The rating actions reflect our expectation that the violent demonstrations of the past week will persist, despite the appointment of a vice-president and the dismissal of the government by President Hosni Mubarak," S&P credit analyst Kai Stukenbrock said.

Yesterday, Moody's cut its rating for Egypt's government bonds, placing it solidly in junk status. Moody's, in a step taken by ratings agency Fitch days earlier, also lowered its outlook on the country from stable to negative.

S&P, echoing its ratings peers, warned that the political instability and unrest will hamper Egypt's economic growth this year, in no small part because of the blow to the vital tourism sector.

Foreigners, and Egyptians, are fleeing the country in droves, with several nations sending in evacuation flights while travellers who had booked trips to Egypt are quickly cancelling.

With tourism likely to take a major hit, the 6% GDP growth figure which officials as recently as three weeks ago were projecting for this year now seems to be wishful thinking. A growing number of companies have halted production and others are withdrawing their foreign staff, at least temporarily.

S&P said it believes the government will strive to reduce poverty by increasing fuel and food subsidies. But such a step will have "negative implications" for the public sector deficit.

"In the absence of emergency spending cuts in other areas, the budget deficit in 2011 could reach double digits... which will be difficult to finance while political uncertainty prevails," S&P said, adding it estimates that general government debt stood at almost 74% of GDP in 2010, well above the BB median of 42% of GDP.

COMMENT RULES: Comments that are judged to be defamatory, abusive or in bad taste are not acceptable and contributors who consistently fall below certain criteria will be permanently blacklisted. The moderator will not enter into debate with individual contributors and the moderator’s decision is final. It is Belfast Telegraph policy to close comments on court cases, tribunals and active legal investigations. We may also close comments on articles which are being targeted for abuse. Problems with commenting? customercare@belfasttelegraph.co.uk

Latest News

Latest Sport

Latest Showbiz