Fitch Ratings has said it believes Egypt cannot begin its long-term recovery until there is more certainty about its political future.
Fitch has previously said it expected the sharp fall in foreign currency reserves largely as a result of substantial capital outflows to start being reversed by external support before the end of this year.
But in a new statement, the ratings agency said delays to the political transition were now causing concern, with reserves continuing to fall, and the global backdrop less supportive.
“Certainty over the political landscape in Egypt is needed to re-start foreign direct investment flows,” it added.
Tourism revenues, which accounted for approximately $12bn of foreign currency earnings, have been hit by both the uncertainty in Egypt and although recovering, they are now threatened by the downturn in the euro zone, Fitch said.
Fitch added that it had expected significant external support to have begun flowing by now.
“The risk of delays is reflected in the agency’s Negative Outlook. However, the longer delays continue, the more pressure it puts on the country’s credit profile. Greater clarity on the timeline for external support would help bolster confidence in the current global climate,” its statement said.
A Reuters poll of economists last week showed Egypt’s economy will grow by just 1.3 percent this financial year and 3.6 percent next as it makes a slow recovery from the disruption to tourism and investment from the uprising that ousted president Hosni Mubarak.
Growth, according to the median figures, will rise to 3.6 percent in 2012/13 but that will fall far short of the rate of 6 percent plus that economists say Egypt needs to start creating enough jobs for its expanding population of 80 million people.
The poll indicated annual inflation would stay in double digits at 11.2 percent in 2011/12 and 10.9 percent in 2012/13.
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