RTTNews - Wednesday, Moody's Investors Service raised the outlook on Egypt's sovereign ratings to stable from negative.

Today's rating action was primarily motivated by the easing of inflation in Egypt since its peak in August 2008, the government's efforts to contain fiscal pressures, and the relative resilience displayed by Egypt's economy and banking system in the face of recent global economic turmoil when compared with rating peers, Tristan Cooper, Moody's Head Analyst for Middle East Sovereigns said.

In the middle of 2008, Moody's had given Egypt's ratings a negative outlook over concerns of adverse social and economic consequence from soaring inflation. These concerns were put to rest as inflation has receded somewhat in recent months and the bouts of double-digit rise in prices over the past 18 months did not cause serious social or fiscal dislocations, Moody's pointed out.

Moreover, the government's deficit was contained over the most recent fiscal year (June 2008 to June 2009) at around the previous year's deficit despite considerable upward pressure on expenditures, particularly on wages and subsidies, and the implementation of a stimulus package, the rating agency noted.

Moody's said Egypt's economy was less affected by the global economic crisis compared to its peers, because it had a moderate level of economic openness, a solid external position, well-diversified economy, and stable banking system along with limited foreign exposure.

However, the country continues to face credit problems,with weakened public finances, a substantially wider fiscal deficit and higher public debt burden than most rating peers. Further, even though inflation had eased, it remained elevated. This, combined with slower growth and rising unemployment, continues to present challenges in light of the country's poor social indicators, Coopers added.

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