Sign in
Still an A/A-1 for S&P: S&P Global Ratings affirmed the Kingdom’s long- and short-term foreign and local currency sovereign credit ratings at A/A-1 with a stable outlook on the back of continued economic and social reforms, it said in a statement on Friday.
Driving the decision: The ratings agency pointed to growing investments in relatively new industries including tourism and other non-oil sectors as we look to diversify away from oil. In the long term, S&P expects Vision 2030 projects will lead to a more diversified economy, create jobs, and a result in a inclusive labor force.
There are risks on the implementation side of the equation, including “funding pressures, tight supply, and increasing cost of materials, skills shortages, and developing basic infrastructure like housing.”
Non-oil is key: Investment in non-oil sectors and solid growth in consumption will help keep overall GDP growth at an average of 3.3% each year through 2027, according to S&P Global. The non-oil sector accounts for around 60% of GDP.
Some pundits see it even higher: Rating agency Moody’s forecasts the Kingdom’s non-oil sector to grow at 5.5%this year on the back of major development projects and a robust economic environment, according to a recent report.
Durability in the face of energy transition: S&P said it sees the Kingdom showing some resilience to a shift away from fossil fuels due to its wide hydrocarbon reserves and cheaper cost of production. It also highlighted its capabilities to influence global oil prices trends through its capacity as the world’s largest swing oil producer and leadership in OPEC+.
Some risks remain: S&P Global said it could downgrade ratings in case of “significant fiscal weakening, demonstrated by an erosion of the government’s net-asset position beyond our expectations, or if real per capita GDP growth were to fall sharply on a sustained basis.” Rising geopolitical tensions could also impact ratings, it added.
