S&P Global Ratings has re-affirmed Saudi Arabia’s existing ‘A-/A-2 sovereign rating with a stable outlook for the economy and an expectation that the kingdom’s expansionary budget will lead to further growth in the economy.
The report noted that S&P believes that Saudi Arabia will achieve its goal of balancing its budget by 2023.
Fiscal reforms are yielding results, with 2018 non-oil revenues increasing by approximately 35 percent over 2017,” the report said.
“That said, we expect that any material economic benefit from the overall reform package will likely only materialise beyond our ratings horizon,” it added.
Additionally, S&P predicted that the central government’s deficit will average approximately 7.5 percent of GDP between 2019 and 2022.
“We note the government’s over-compliance with OPEC production cuts, which aim to boost oil prices,” the report said. “If oil prices increase, this could quickly improve Saudi Arabia’s fiscal position, as it did in 2018.”
Overall, S&P said that the stable outlook for the kingdom “reflects our expectation that Saudi Arabia will maintain a pace of moderate economic growth and retain strong government and external balance sheets over the next two years.”
In the future, S&P said that it could raise Saudi Arabia’s ratings if growth prospects - largely driven by a more diversified economy - result in growth exceeding expectations.
Conversely, the ratings could be lowered in the event of “an unexpected materialisation of contingent liabilities”, a build-up of arrears, or a significant increase in domestic or regional political instability.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.