EGYPT

RISK RATING
Elevated
Default High Risk Score 5.00
Normal Average 3.45
Weighted Average 2.85
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

Egypt is one of only three economies in the Middle East and Central Asia that maintained positive GDP growth during the pandemic, and the only large African economy to do so in 2020. A steady growth outlook is expected over the next five years, inflation has eased, and all three global credit ratings agencies have given Egypt a stable outlook. While the finalisation in June of USD 5.2 billion in additional IMF funding has contributed to the shoring up of Egypt’s remaining foreign exchange reserves in the short-term, the recovery of major foreign revenue streams will likely take some years. As a result, borrowing is likely to remain the primary pathway for propping up dwindling foreign exchange reserves. If economic growth proceeds at a much lower rate than expected and does not filter through to more vulnerable sectors, the threat of civil unrest will correspondingly increase. Economic grievances along with a continued militant threat are also likely to persist this year as well.

  • The role of the military-industrial complex in economic development is key to retaining political stability. A crucial aspect of the political consolidation is integrating the security services into the planned megaprojects that are underway in the country. Public demonstrations in Egypt have become increasingly rare and are likely to remain subdued. Even though underlying grievances with the government are likely to persist, Egypt’s organised political opposition has been largely incapacitated. Authorities have also established effective routines for containing and quelling incidents of civil unrest, including the rapid deployment of security forces to key protest venues and the shutting down of major transport hubs.
  • The locus of terrorist activity in Egypt is the northern Sinai Peninsula, where the Islamic State militant group’s domestic branch, Wilayat Sinai, continues to conduct frequent attacks targeting Egyptian security forces and religious minorities. While there is some evidence that intensified security operations have eliminated some of Wilayat Sinai’s high-ranking leadership, constrained militants’ ability to move in the area, as well as interrupted supply chains and resulted in the destruction of hide-outs, there have been few indications of any lasting impact on Wilayat Sinai’s operational capabilities. Outside of the Sinai, the primary threat actor is the Hasm Movement: an anti-government group that since 2016 has carried out hit-and-run shootings and bombings targeting government, judicial and security personnel.
  • The pandemic has curtailed foreign earnings, highlighting long-standing structural vulnerabilities. Egypt’s main sources of foreign revenues, including tourism, remittances, and oil and gas exports, fell by 30 percent in 2020, thus draining foreign exchange reserves. Global oil and gas prices are expected to remain volatile, constraining both foreign investment and earnings in the hydrocarbons sector, which remains Egypt’s largest recipient of FDI. While the finalisation of USD 5.2 billion in additional IMF funding has contributed to the shoring up of Egypt’s remaining foreign exchange reserves in the short-term, the recovery of major foreign revenue streams will likely take some years. This bodes ominously for debt repayments – public debt now stands at 86 percent of GDP.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
2.0
Expropriation, Nationalisation, Confiscation & Deprivation
2.5
Contract Frustration & Breach
3.0
Taxation
3.0
Bribery & Corruption
4.0
Regulatory Burden
4.0
Strikes, Riots & Civil Commotion
4.0
Security
5.0
Sovereign Default
3.0
Economic Volatiliy
4.0

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