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Moody’s Predicts 40% Chance of Egypt Default in 5 Years
Posted By Daniel Greenfield On March 26, 2013 @ 6:50 pm In The Point | 15 Comments
Islamism is apparently how you spell bad investment.
Moody’s cut Egypt’s credit rating on Thursday, citing unsettled political conditions and public finances, which it said raised the chance of a default within five years to nearly 40 percent.
The Egyptian economy has been in crisis since the overthrow of Hosni Mubarak in 2011, with Islamist President Mohamed Morsi’s cash-strapped government grappling with sliding currency reserves, dwindling tourism, a soaring budget deficit and a wave of often violent street protests.
Moody’s cut the country’s credit rating by one notch from B3 to Caa1, which it said meant it now sees nearly a 10 percent chance of Egypt defaulting on its debt over the next year, and slightly less than a 40 percent chance of a default within five years.
It was Moody’s sixth downgrade of Egypt since January 2011, at the height of the uprising that toppled Mubarak soon after.
“Egypt’s fiscal position is very worrying, the deficit has been widening since the start of the fiscal year… This has been exacerbated by rising subsidy expenditure,” said Jason Turvey, assistant economist at Capital Economics in London.
“It’s hard to say how much the downgrades really matter because, after all, Egypt is already considered at junk status,” said Turvey.
The Arab Spring is also at junk status.
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