Egypt Country Risk Rating

Egypt’s overall risk level remains high. The breakdown of the U.S./Iran MOU and restart of moderate hostilities threatens tourism and Suez canal traffic and the impact has been amplified by the Houthi attacks on shipping in the Red Sea. Egypt is also concerned about the July 29 drone attack on its Damietta port. This will likely mean that the 2026 GDP forecast of 4.2% by the IMF is too high, while inflation will likely overshoot the projection of 13.2%. Nevertheless, Egypt has the buffer of sound long-term FDI inflows and loans, with the IMF still pleased with reforms in the July review. The Egyptian Pound has also recovered from the April lows and the adjustment YTD is modest. The sovereign non-payment risk thus remains at a medium high rating as the government debt/GDP is coming down multi-year. The risk of doing business is medium high and the inability of government to provide fiscal stimulus remains at high.

Meanwhile, the political violence risk rating remains very high, with political interference and legal & regulatory risk at high. Egypt has seen tension late spring over generation Z supporters wanting more freedom of expression. Additionally, the authorities remain concerned about the fragile peace in Gaza and the risk that it could spill over into domestic tensions. Meanwhile, Egypt and Israel relations remain tense, with Egypt joining others in criticism of Israel’s actions in Gaza and the West Bank. However, relations are recovering between Egypt and the UAE after previous UAE disappointment over limited Egyptian support during the spring phase of the Iran war. The UAE has a huge USD35bln Mediterranean resort being built in Egypt.