Fitch affirms Saudi Arabia’s ‘A+’ credit rating with stable outlook

Fitch Ratings has affirmed on Friday Saudi Arabia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘A+’ with a Stable Outlook, citing the kingdom’s strong fiscal position, substantial foreign reserves, and ongoing economic reforms under Vision 2030.

Fiscal Challenges: Deficit Expected to Widen

The 2024 budget deficit was estimated at 2.8 per cent of GDP, slightly above the 2 per cent deficit in 2023. Fitch forecasts a widening to 3.8 per cent in 2025 as oil revenues decline and an extraordinary dividend from Aramco is not repeated.

However, capital expenditure is expected to decline following one-time land acquisitions in 2024, and the government has demonstrated flexibility in scaling back projects if needed. Debt-to-GDP is projected to rise to 35.3 per cent by 2026, but remains far below the peer median of 55.1 per cent.

Geopolitical and Governance Factors

Fitch acknowledges reduced geopolitical risks in the region, with no major economic disruptions recorded in 2024. Governance indicators have improved, though political stability and accountability remain weaker than peers.

Future Rating Drivers

Positive rating factors:

• Fiscal reforms that increase budget resilience to oil price volatility.
• Sustained non-oil economic growth through continued economic diversification.
• Higher-than-expected oil prices leading to stronger public and external balance sheets.

Negative rating factors:

• A sharp deterioration in public finances, including rising debt or depletion of fiscal reserves.
• Geopolitical shocks that significantly impact economic activity.
• A sustained rise in government-related entity (GRE) debt without productive investment returns.

Attribution: Amwal Al Ghad English