Moody's - REUTERS
CAIRO - 16 January 2018: Moody's expected in a Tuesday report that Egypt's economic growth will accelerate from 4.2 percent in 2017 to around 5.0 percent by 2019 and 5.5 percent by 2021, as structural reforms support more broad-based activity compared to the mostly consumption-driven pre-reform growth model.
Fiscal reform programs and official liquidity assistance mitigate exposure to higher interest rates. Nevertheless, high debt levels, low debt affordability, large funding needs and relatively high debt roll-over rates increase Lebanon, Egypt, and Jordan's exposure to a sharper-than-expected rise in interest rates, Moody’s noted in its 2018 outlook for sovereign ratings in the Levant and North Africa region.
Moreover, fiscal consolidation will be more challenging for Tunisia, Egypt and Lebanon, the report added.
"The improved global growth dynamics, ongoing structural reforms, and gradual re-opening of trade routes in former conflict areas together with a planned reconstruction drive will underpin GDP growth in 2018.," said Elisa Parisi-Capone, Moody's vice president - senior analyst and co-author of the report.
"In addition, a tightening of global financing conditions poses fiscal risks for some countries, and elevated political risk will continue to drive event risk in the region." Elisa added.
The report clarified that as of January 16, 2018, four sovereigns in the Levant and North Africa region held stable rating outlooks, while one (Morocco) carries a positive outlook and another (Tunisia) a negative outlook.
Higher global growth will drive an increase in the region's exports, including tourism, and remittances and investment flows in 2018. Moderate oil prices will provide further support, while the region's five oil-importing countries are making progress toward accessing or developing lower-cost or renewable energy sources to permanently reduce their energy deficits. That said, the region's economic potential continues to be significantly hampered by structural weaknesses, in particular, labor market inefficiencies and weak competitiveness, according to Moody’s report.
Moody's also forecasted GDP growth to pick up in Iraq, Jordan and Lebanon in 2018 to 2.9 percent , 2.5 percent , 2.8 percent, respectively.
In Morocco, the cyclical recovery is expected to moderate, with GDP growth at 3.5 percent in 2018 from 3.9 percent in 2017 due to a lower contribution to growth from the agriculture sector, the report showed.
Moody's noted that elevated tensions between Saudi Arabia and Iran, lingering security risks from recent regional conflicts in Iraq and Syria, and recurring Israeli-Palestinian tensions will shape geopolitical risk in the Levant, whereas North Africa remains exposed to potential policy paralysis from popular opposition to fiscal reform.