Credendo has warned that it might downgrade the Egyptian economy to the medium and long-term political risk category.
A European credit insurance group, Credendo, added that the pandemic and the war in Ukraine showed that Egypt faces significant economic vulnerabilities. Egypt has been severely affected by the sharp increase in commodity prices due to being a net importer of food and oil, its dependence on foreign capital financing and its weak public financial resources.
The insurance group warned that despite steady growth rates, there are still fundamental imbalances, as the main weak points in the Egyptian economy include low savings and investments, low productivity, high informality within the economy, and the heavy presence of the state in the economy.
The Egyptian government has said that it is ready to privatize part of the economy, but due to vested interests, strengthening the private sector is very difficult in the Egyptian economy, according to Credendo. Egypt witnessed large capital outflows due to the war in Ukraine and the continuous tightening of global financial conditions, eventually dropping foreign exchange reserves to about $25 billion. The Egyptian pound has depreciated sharply against the dollar. Although this aligns with the International Monetary Fund’s requirements, it will add to inflationary pressures in the short term.