Moritz Kraemer, global chief rating officer at S&P, says in interview
In a wide-ranging interview with Saudi paper Arab News, S&P’s global chief rating officer Moritz Kraemer said that political reform will determine the future of the country – not the price of oil.
“If oil went to $100 per barrel again there would be a risk of undermining the reform momentum, and helping those campaigning to maintain the previous status quo,” he told the paper. “So, we don’t think the oil price will determine the fate of the country. The policies that are chosen will determine future economic stability.”
Kraemer added that Saudi’s prospects depend the degree to which the reforms now being introduced become “irreversible”.
"Although the price of oil has been enjoying a recent surge, due to continued supply constraints and an uptick in demand from China, S&P feels it will be short-lived – even dipping back to $50 by 2019. It is, therefore, essential that the country continues to diversify its economy and bring in more private capital. “Whether that happens slower or faster is less important than the irreversibility of the process,” he said.
The fact that Saudi debt is attractive on the international bond market, as evidenced by the number and value of bonds being issued, demonstrates the appeal of the country to foreign investors.
S&P’s generally positive outlook, as articulated in its country report at the end of 2017, is predicated on the continuing drive to consolidate public finances.
According to the World Bank, Saudi Arabia’s growth is forecast to accelerate to 1.2 percent in 2018 from 0.3 percent in 2017.
Since we're speaking economy- for this coming fiscal year, the revenue side compares favorably with those from recent years; total revenues were projected at $185 billion in 2017, while the actual amount for 2016 was $141 billion. Saudi is taking risks- oh yes. But it is paying off... The higher revenue figures partly reflect the introduction of value-added tax at the start of 2018. In fact, the government started another taxation in June last, namely the excise tax on tobacco products, energy and fizzy drinks, the first time by any Gulf country. But then again these taxes are more or less going back to the citizens. It isn't just the VAT at all. Other measures aimed at boosting revenues entail a reduction of subsidies, as well as higher fees for governmental services. Officials have simultaneously developed special plans to help locals cope with the higher cost of living.