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S&P upgrades Egypt debt rating on better economic outlook

Ratings agency S&P upgraded Egypt’s debt grade by one notch, citing stronger economic growth and moderating inflation.

S&P raised Egypt’s sovereign credit rating to “B” from “B-” which is still below investment grade but further up the scale.

Improving economy

The ratings agency cited the improving economy, which is expected to average growth of 5.4 percent over the next four years, reflecting “a more broad-based recovery and a slight move away from consumption” towards greater investment and net exports.

Consumer price inflation fell to 13.3 percent year-on-year in March, the lowest level in nearly two years, the agency said. However, Egypt’s debt ratings remain constrained by large fiscal and external deficits, high public debt and low income levels.

The country could earn a higher rating if growth outpaces forecasts, if external financing needs ebb and if reforms leads to lower debt, the statement said.

But, negative pressure on the rating could come from an unexpected rise in debt or “if the security environment worsens, hindering the recovery in investment and tourism,” S&P said.

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