Tunisia replay unlikely in Egypt but risk rises: Fitch

TUNIS (Reuters) - A replay of the Tunisian revolution is unlikely in Egypt, but political risks there have increased, Fitch Ratings said on Thursday as unprecedented protests against President Hosni Mubarak entered a third day.

In an analysts' call on North Africa, Fitch said it was monitoring the political situation in Egypt closely but it was too early to change its economic forecasts or debt ratings.

"The situation is clearly fluid... It's very difficult to know what will happen ... but we don't expect a replay of the events in Tunisia," said Richard Fox, Fitch's head of Middle East and Africa sovereign ratings.

"The big difference is there is a much stronger relationship between the military and the ruling party... Stability should be restored in due course, but the risks have increased."

Tunisian leader Zine al-Abdine Ben Ali fled the country on Jan 14, after weeks of protests against repression and poor living standards. The turning point in those protests is widely believed to have come when the army refused to crack down on the demonstrators, effectively forcing Ben Ali to leave.

While the political conditions differ, the Tunisian uprising has electrified Arabs across the Middle East and North Africa, where authoritarian rule and youth unemployment are common. Inspired by Tunisia, protests have broken out in Egypt, where police have struggled to disperse gatherings.

Even if Egyptian security forces get through this outbreak of demonstrations, more protests are likely in the run-up to Egypt's presidential elections in September, Fox said.

It is not yet clear if Mubarak, who has been president since Islamists assassinated his predecessor in 1981, will run for another term. Egyptian law severely restricts the participation of opposition parties and potential presidential rivals.

"With the elections in September this will be a continued focus for protests," he said. "What we can take away from Tunisia is that the unexpected can happen rather quickly."

Fox said food subsidies, which account for some 1.5 percent of gross domestic product, could increase by another 0.5 percent in Egypt, where food inflation runs at around 17 percent, a much higher level than that found in Tunisia.

However, this increase can be absorbed without having a major impact on the budget deficit, he said.

The Egyptian pound would probably be allowed to weaken slightly if protests continue, but this would be unlikely to cause a major rise in inflation, Fox added.

Foreign direct investment remained stable in Egypt, he said, while it was not clear how badly tourism would be affected.

"The places tourists go to are quite a long way away from where the protests are," Fox said.

"A lot depends on whether these protests continue."

(Reporting by Lin Noueihed; Editing by Hugh Lawson)