Saudi Arabia's economy depends more on policy than oil - S&P analyst

Moritz Kraemer, global chief rating officer at S&P, says in interview
Saudi Arabia's economy depends more on policy than oil - S&P analyst
If oil went to $100 per barrel again there would be a risk of undermining the reform momentum, S&P’s global chief rating officer Moritz Kraemer.
By Staff writer
Sun 28 Jan 2018 07:31 PM

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.

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