Moody's cuts Egypt view to negative

Moody's Investors Service said it changed the outlook on Egypt's Ba1 foreign-currency government bond rating to negative from stable. It also changed the outlook on Egypt's foreign-currency country ceilings for bonds (Baa2) and bank deposits (Ba2) to negative from stable. Moody's also downgraded the government's local-currency bond rating to Ba1 from Baa3, while preserving its negative outlook.

The action was primarily motivated by the country's soaring consumer price inflation, which exceeded 20% in May, Moody's said. This was the highest level in Egypt for nearly 20 years and considerably higher than the 6% to 7% inflation rate expected by Moody's for Ba rated countries in 2008, the agency added.

Egypt's ratings are particularly exposed to rising inflation, Moody's said. The country displays a rather high degree of social vulnerability given its relatively low income per capita and higher poverty rate, the agency said.

Egypt is more fiscally constrained than similarly rated countries, Moody's added.

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