Egypt is on the path to recovery, says rating agency Moody’s, thanks to the implementation of fiscal reforms including raising the prices of heavily subsidised energy products by 78%.

In a report issued in late October, Moody’s said the Egyptian government’s shift to implement several economic reforms in the past year coupled with the $4bn extension of the Suez Canal mean Egypt’s GDP will grow to 3.7% in the last quarter of 2014.

Raising Egypt’s credit outlook from negative to stable, Moody’s maintained that although the country’s high external debt and large borrowing needs mean government finances remain weak, President Abdel Fattah al-Sisi’s success in maintaining a relatively stable domestic political environment while phasing out fuel and electricity subsidies has done much to stabilise the investment environment. In addition, the successful completion of the Suez Canal Corridor Project bidding process in August will significantly boost Egypt’s maritime and shipping industry. The government chose a consortium including Egypt-based engineering firm Dar Al-Handasah to work on the project.

“The outlook change to stable from negative reflects Moody's expectations of an improving fiscal and economic environment, building on a number of developments over the past year that reduce downside risks to the rating,” Moody’s said in an online statement. “The expansion of the canal and development of the surrounding area will be a central supporting factor for economic growth and employment over the next five years at least.”

Although Egypt’s economic reform is in its infancy and it is unclear how parliamentary elections in early 2015 will affect the country’s political environment, Moody’s asserted that the upgraded rating reflects improving investor confidence in the country.