Over the past period, Moody’s Investors Service has applauded certain sectors in Egypt but some challenges are still standing in front of improvement.

In its latest report on Egypt issued this week, Moody’s said that the new regulations issued by the Central Bank of Egypt (CBE) are credit positive for Egyptian banks.

The report explained that these regulations will mitigate the credit risk in banks’ growing retail portfolios and will reduce banks’ asset quality vulnerability that has been the result of focusing on large single-corporate customers.

Moody’s reports that over the past four years, retail lending in Egypt has increased by 73% despite the weakness of total loan growth and that retail lending currently constitutes 27% of private-sector loans.

Retail lending in Egypt is salary assigned, with the payment automatically deducted from the borrower’s salary, a measure that is intended to diminish credit risk, according to the report.

In a December report, Moody’s Analytics said that deterioration in Egypt’s economic outlook has led to a sharp increase in the country’s sovereign risk profile.

According to Moody’s, the reforms applied to the Egyptian economy showed improvements in Egypt’s public finances and economic conditions. The ratings agency noted that there are still challenges however including the government’s large financing needs, structural economic issues such as high unemployment rate and inflation, and elevated political risks.

In the report, Moody’s projections reveal a GDP growth of 5% for the current fiscal year (FY) 2015/2016, up from 4.5% in FY 2014/2015.

The report said the introduction of the value-added tax as a replacement for the current sales tax, was delayed several times, although the government aimed to implement it before the end of 2015.

Moody’s also saw the announcement of the large offshore natural gas discovery in the eastern Mediterranean by the Italian energy giant Eni as credit positive for the company and for Egypt.

For Eni, the discovery will add sizable undeveloped resources and proven reserves whilst also potentially adding to its production base in the medium-term, the agency said.

Moody’s says that, for Egypt, the discovery will help alleviate the balance of payment pressures. The potential increase in oil and gas sector investments will support GDP growth and government revenues.

Moody’s indicated in another report that the future expectations for the insurance market in Egypt are “encouraging” despite challenges being faced by the country.

According to Moody’s, Egypt comes second place after Morocco, the biggest insurance market in North Africa, which is “a region that accounted for roughly 0.2% of global insurance premiums in 2014”.