Country risk

Country risk in Egypt is high. The OECD has a country risk grade of 5, akin to a speculative grade sovereign credit rating. This indicates an elevated risk of Egypt being unable and/or unwilling to meet its external debt obligations.

Egypt is ranked 114th out of 190 countries on the World Bank’s latest ease of doing business scorecard. Businesses find it difficult to enforce contracts, trade across borders, pay taxes and register property when compared to the rest of the Middle East. The military’s role in the economy has continued to expand in recent years, dampening private sector business confidence. In addition, Egypt has a complex regulatory and operating environment, which can make it challenging for foreign companies to do business. On the plus side, getting credit, protecting minority investors, dealing with construction permits and getting electricity is somewhat easier in Egypt than other Middle Eastern countries.

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. Notably, the 2017 investment law provides guarantees against full or partial expropriation. But corruption is perceived as high and widespread.

Egypt underperforms most of the Middle East and North Africa region on the various measures of governance. Voice and accountability, regulatory quality and political stability are particularly weak. Egypt’s governance scores improved in all categories except control of corruption in 2019. Policy efforts to reform the economy, strengthen state-owned enterprises and solid GDP growth prospects beyond the pandemic could sow the seeds for stronger governance.

Political risk is elevated, but has improved following the domestic crisis that plagued the first half of the 2010s. Still, tight government control of political discourse, increasing poverty and rising costs of living, exacerbated most recently by the COVID-19 pandemic, increase risks of social unrest and political instability.