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We’re still a A+ for Fitch: Ratings agency Fitch affirmed the Kingdom’s credit rating of A+ on the back of a solid fiscal position and strong external balance sheet, including a positive debt-to-GDP ratio and strong sovereign net foreign assets, it said in a statement yesterday. It left its outlook on Saudi at “stable.”
Driving the decision: Fitch said the “government’s debt-to-GDP [ratio] and sovereign net foreign assets are considerably stronger than both the A and AA medians.” It also cited “significant fiscal buffers” in deposits and other public sector assets.
The weak points: The ratings agency said “oil dependence, low World Bank governance indicators and vulnerability to geopolitical shocks remain relative weaknesses.” Still, governance is improving as policymakers push ahead with social and economic reforms and cabinet works to strengthen the effectiveness of state agencies and institutions.
We’re still very dependent on oil, Fitch writes (shocking, we know). The agency’s forecast sees oil revenues accounting for c. 60% the state’s income in FY 2024-2025.
Non-oil, private-sector GDP will grow at a 4.5% clip in 2024-2025, it said, down a bit from c. 5% in the last fiscal year. Driving growth: continued investment by the government, reforms, and gradually lower interest rates. Strong credit growth, booming retail and tourism, and rising employment will be factors, it said.
Rising spending on gigaprojects could be a medium-term risk: Rising government spending outside the budget as part of its Vision 2030 and a possible higher debt of state-owned and government-related entities could be a medium-term risk to to the Kingdom’s balance sheet, Fitch said. “However, leverage is currently low across the public sector and investments may bring returns” by driving private-sector crowth and creating new jobs, it added.
