Saudi currency ratings get stable S&P outlook

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S&P Global Ratings has affirmed its 'A-/A-2' unsolicited long- and short-term foreign and local currency sovereign credit ratings on Saudi Arabia.

The top ratings agency has given a stable outlook to the kingdom based on its expectation that moderate economic growth will continue through 2021, supported by rising government investment.

"At the same time, we expect that the Saudi authorities will continue to take steps to consolidate public finances over the next two years, while maintaining the government's large stocks of liquid external assets. We could raise the ratings if Saudi Arabia's economic growth prospects improved markedly beyond our current assumptions," said S&P Global Ratings in its review.

The ratings agency cautioned that it could lower the ratings if a reversal in the trend of fiscal consolidation, or a sharp deterioration of the sovereign's external position, was observed.

An unexpected materialisation of contingent liabilities or a build-up of arrears could also place additional pressure on expenditures.

"The ratings could also come under pressure if we observed a significant increase in domestic or regional political instability, which we thought would have fiscal consequences," it stated.

According to S&P, these ratings on Saudi Arabia are supported by its strong external and fiscal stock positions, which we expect it will maintain despite ongoing central government deficits.

"Since our last review in April, we have raised our oil price assumptions; but we do not expect any material change to the overall pace of fiscal consolidation," it stated.

The top ratings agency said it expected the additional revenues from higher oil prices would be spent as suggested in the recent 2019 pre-budget statement.

"The ratings are constrained by the limitations on the transparency of government assets and limited monetary policy flexibility," it stated.

"While decision-making structures are centralized and, in our view, relatively opaque, we do not expect any major deviation from the stated domestic policy course of fiscal consolidation, economic diversification, and gradual socio-economic liberalisation, it added.

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