Home > Long-term credit: S&P downgrades Saudi Arabia’s rating

Long-term credit: S&P downgrades Saudi Arabia’s rating



PARIS: Standard and Poor’s lowered its long-term credit rating for Saudi Arabia one notch to A+ after the kingdom’s deficit rose sharply because of low oil prices.

The ratings agency maintained its negative outlook on Saudi Arabia, a key member of OPEC, saying in a statement that the decision reflected the challenges of reversing the “marked deterioration” in the Saudi fiscal balance.

S&P said it could further lower the ratings within the next two years if Riyadh fails to achieve a “sizable and sustained reduction in the general government deficit”.

It said Saudi Arabia, one of the world’s leading oil producers, had seen its deficit climb to 16% of GDP in 2015 compared with 1.5% in 2014, because of the plunge in the price of crude oil, Riyadh’s main source of revenues.

It said the government could cut back on key investments and cut subsidies on power, water and fuel that could strengthen government finances in the coming years.

But it also made reference to political risk, saying that “intrafamily issues around succession could make the kingdom’s policy decisions more challenging and difficult to predict.”

S&P had put the Gulf state on negative outlook in February, warning its dependence on oil threatened its fiscal position.

Between June 2014 and September this year the price of a barrel of oil has tumbled from $90 to less than $50.

Published in The Express Tribune, November 1st, 2015.

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