The current macroeconomic climate in
Supporting its stance, Fitch cited "tentative improvements in political and economic stability" amid large inflows of funds from the Gulf following the ouster of former president
As a primary weakness, the report pointed to the deteriorating state of
Total spending rose to 33.5% of GDP in FY 2013 (up from 30.3% of GDP in FY 2010), as wages and subsidies spending surged (75% of the total), an issue the report said would be difficult to tackle given its political sensitivity.
Added to this expenditure are the two parts of the interim government's recent economic stimulus package, with tranches in September and February tallying
The report stressed the increasing difficulty of financing the rising deficit, with the government bearing a debt of 89.2% of GDP at the end of FY 2013 and losing its status as a net creditor in the same year. Meanwhile, net foreign reserves have fallen from almost
Another macroeconomic concern the report cited was "above peer" levels of inflation, which it said stemmed partly from supply chain bottlenecks.
Despite the challenges, Fitch expects growth to pick up over the next few years given "reduced political instability, greater access to foreign exchange, and fiscal and monetary stimulus". However, although the agency foresees two years of recovery, such growth should be slow and unlikely to return to 2010 levels even by the end of 2015.
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