Cairo – Mubasher: Fitch Ratings on Monday said it has affirmed Egypt's long-term foreign currency Issuer Default Rating (IDR) at 'B' with a positive outlook.

The most Arab populous nation’s gross domestic product (GDP) grew to 5.2% in fiscal year 2017/2018 on the back of improved tourism, construction and gas extraction, according to a report by Fitch Ratings.

Inflation rate fell to 11.5% year-on-year in May, after averaging 29.5% in 2017, while it rose to 14.4% in June following further subsidy reforms ahead of 2019, the agency indicated.

The agency forecast that the North African nation’s GDP growth will accelerate to 5.5% in FY18/19 and FY19/20, whereas average inflation will slip to 11.6% in 2019, as compared with 13.0% in 2018.

“Balance of payments dynamics underpinned a sharp increase in FX reserves, which have continued to grow in 2018,” the report pointed out.

The reported also noted that reserves stood at $44.3 billion at the end of June, up from $36.3 billion at end-2017.

“The Egyptian pound has been very stable against the dollar, averaging EGP 17.75:$1 in January-July, virtually the same as the annual average in 2017,” the report highlighted, adding that the pound depreciated by 1.3% during May-July period.

Net foreign direct investment (FDI) inflows made up 77% of the current account deficits (CAD) in 2017, up from 39% in FY15/16, while net FDI covered more than 100% of the CAD in the first quarter of 2018, the report said.

Fitch Ratings projected a budget deficit of 8.8% of GDP and a primary surplus of 2% of GDP in FY19, which is “slightly worse” than the Egyptian government forecasts of 8.4% of GDP in FY19 and a primary surplus of 2% of GDP.