Egypt Country Risk Rating

Egypt’s overall risk level remains high. The U.S./Iran war has prompted a hit to Egypt, with Suez Canal traffic tempered by fears of a spread of the war to the Red Sea and tourist inflows hurt by regional instability.  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% (partly because the government raised fuel prices in March). Nevertheless, Egypt is in a better situation than the 2022 Ukraine war, as large official loans and FDI from the Gulf states have transformed the central bank’s FX reserves and current account deficit financing. The Egyptian Pound has fallen 8% against the USD since the start of the war, but this is a considered adjustment given the U.S./Iran war. 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. However, it is noticeable that the UAE is displeased that they did not receive more Egyptian support during the war phase.  The UAE has a USD35bln Mediterranean resort being built.   

Meanwhile, the political violence risk rating remains very high, with political interference and legal & regulatory risk at high. Egypt remains concerned about the fragile peace in Gaza could be disrupted by Israel and the risk that it could spill over into domestic tensions, including the risk of displacement of Gaza residents. Meanwhile, the Israel/U.S. attack on Iran, has also prompted concerns over unrest in Egypt. Egypt/Israel relations are very strained.  The previous cost-of-living crisis also continues to risk future protests against inflation and unemployment.