Jun 23 2012
|more articles from|
The Supreme Constitutional Court decision to dissolve the Egyptian parliament took investors and observers by surprise and was immediately negatively translated by international credit rating agencies.
On Friday, Fitch IBCA decided to downgrade Egypt's sovereign credit rating deeper into junk status.
According to a Fitch Ratings press release, the downgrade and negative outlook reflect increased uncertainties surrounding Egypt's political transition following the ruling by the Supreme Constitutional Court to annul parliamentary elections and dissolve parliament.
Fitch added: "The need to re-run parliamentary elections will, at the very least, delay the emergence of a workable and inclusive governance structure."
Moody's Investors Service was quoted by Bloomberg news agency Monday as saying that heightened political uncertainty would likely prove a setback to the economy, which was just beginning to regain some domestic and foreign creditor confidence.
Since the uprising late in January 2011, Egypt has been witnessing continuous downgrading by international investment houses, reflecting the negative effect of instability on the country's economy, foreign reserves, and public finances.
In addition to tension preceding the announcement of the result of the presidential election, the Fitch move stripped the market of 8 per cent in Monday , Tuesday and Wednesday trading, the first sessions of the week following the investment house downgrade decision.
On Monday, the EGX30 fell to a near five-month low amid heavy selling from foreign investors. The downward trend continued on both Tuesday and Wednesday pushing the measure's overall decline to 8 per cent. This narrowed market gains since the beginning of the year to 12 per cent compared to 40 per cent in early April when the political scene was less murky.
Adding to the injury, Central Bank of Egypt Governor Farouk El-Okda said this week that Egypt's economic growth would slow to below two per cent this year from 2.5 per cent last year as a result of political turmoil.
© Al Ahram Weekly 2012
© Copyright Zawya. All Rights Reserved.