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An Aa1 from Moody’s: Rating agency Moody’s has upgraded Saudi’s local and foreign currency rating to Aa1 from Aa2 on the back of improved government decision-making and institutional reforms, Reuters reported, citing a report by Moody’s. It said the upgrade came due to “increased predictability of policies and decision-making processes affecting non-government issuers given institutional improvements.”
Key insights: The report said a “zero-notch gap” between the foreign currency and local currency ratings was backed by robust forex reserves by Saudi central bank Sama. This signals minimal risks associated with transfers or convertibility.
Something to watch out for: The rating agency said a “three-notch gap” between the local currency rating and the A1 sovereign rating came due to a heavy reliance on a single revenue source — read: oil — for the public and private sector and growing geopolitical risks.
REMEMBER- Finance Minister Mohamed Al Jadaan said recently that the Kingdom could drive faster GDP growth by pumping more oil, but it wouldn’t be “comprehensive and sustainable growth. … If we wanted, we could produce 10 mn barrels of oil per day instead of 9.5 mn and achieve a much larger growth in GDP,” he said.
What the others are saying: S&P Global Ratings affirmed in March 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 expects Vision 2030 projects will lead to a more diversified economy, create jobs, and result in an inclusive labor force.
