S&P Global Ratings could upgrade its ratings on Saudi Arabia if robust non-oil activity increases GDP per capita and leads to greater inflows of private and foreign capital.

In March, the ratings agency raised the Kingdom’s rating to ‘A+/Stable/A1’ from ‘A/Stable/A1’.

The Kingdom’s economy is expected to grow at 3.5% over 2025-2028, with fiscal deficits anticipated to average 4.4% of GDP over the same period, mainly due to Vision 2030 investments.

Initiatives rolled out under Vision 2030 are expected to strengthen non-oil growth over the medium term, underpinned by increased construction activities and a growing services sector that benefits from rising consumer demand and an expanding workforce.  

Tourism has emerged as a major growth driver, contributing 6% to GDP and 14% to current account receipts in 2024, up from 5% in 2022. This upward trend is supported by improved visa policies and more leisure options.

However, fiscal risks from rising debt issuances by the government and Public Investment Fund (PIF) are mitigated by the revised timelines of some large infrastructure projects.

The government is expected to retain a net asset position close to 30% of GDP through 2028, the report said.

Although interest costs will stay low, S&P anticipated they could exceed 5% for the first time. Still, the government will maintain a comfortable net asset position through 2028.

Despite oil and gas being excluded from direct US tariffs, global demand may see a potentially sharper-than-expected slowdown due to weaker economic activity.

Moreover, other government decisions could disproportionately impair exposed operations and credit profiles.

“We expect Saudi issuers will continue tapping into the global and local capital markets to finance Vision 2030 initiatives - assuming no disruptions from the rising geopolitical risk,” the report said.

S&P said that it will closely track the potential implications of rising leverage over the medium to long term, as the short term appears “manageable”.

(Editing by Brinda Darasha; brinda.darasha@lseg.com)