Country risk in Egypt is high with an OECD country credit grade of 6. This is akin to a speculative grade sovereign rating, which indicates an elevated risk of Egypt being unable and/or unwilling to meet its external debt obligations. But the liberalisation of the exchange rate and greater push to embrace market reforms poses upside to the rating.
Egypt is ranked 128 out of a possible 190 countries on the World Bank’s ease of doing business scorecard. Businesses find it difficult to enforce contracts, trade across borders, pay taxes, register property and deal with construction permits when compared to the rest of the Middle East. But getting credit, protecting minority investors and getting electricity is easier.
The risk of expropriation in Egypt is moderate to high. This stems from large delays in the legal system to resolve cases, making it difficult for private enterprise to seek recourse from the government. Corruption is also perceived as high and widespread.
Egypt underperforms most of the region on the various measures of governance. Voice and accountability, regulatory quality and political stability are particularly poor in Egypt. Not surprisingly, political risk is also elevated. But the policy drive to reform the economy and the rosier economic outlook could sow the seeds for good governance.