Cairo – Mubasher: Egypt’s current credit profile, rated “B3 stable” by Moody’s Investors Services, has a large, diversified economy and strong reform momentum, the ratings agency said in a report released late Tuesday.

It added that this credit profile is weakened by poor government finances, which continue to pose a main challenge to the economy.

"Although Egypt's economic growth is still below pre-revolution levels, it has started to pick up, and investor sentiment has also improved on the back of strengthened reform momentum," said Steffen Dyck, a Moody's vice president -- senior credit officer, and co-author of the report.

"We also expect that Egypt's high fiscal deficits and government debt levels will gradually reduce," he added.

The US-based ratings agency forecasts that Egypt’s general government primary deficit “has been cut to 1.8%” of gross domestic product (GDP) in FY2016/2017, which ended 30 June, down from 3.7% in the prior period.

Egypt’s deficit will likely shift to “show small surpluses from 2019,” the report indicated.

Moody’s also forecasts a GDP budget deficit for fiscal year 2018 of 10%, a slight rise over the 9.2% projected by the budget, but down from an estimated 12.1% in 2016, according to the report.

“Preliminary official figures suggest real GDP growth of 4.2% in 2017, and Moody's expects a further acceleration to 5.0% in 2019, supported by the government's structural reforms,” the ratings agency highlighted.

Furthermore, Egypt’s implementation of economic and fiscal reforms underscores the improvement in government effectiveness and policy predictability.