S&P downgrades Saudi Arabia’s credit ratings on weak oil

Standard & Poor’s Ratings Services lowered Friday Saudi Arabia’s long-term foreign currency sovereign credit rating to A+ from AA-, citing a widening budget deficit resulting from weaker oil prices.

The ratings agency projected the country’s fiscal shortfall will jump to 16% of gross domestic product this year from 1.5% in 2014.

S&P said it expects Saudi Arabia to draw down its fiscal assets and issue debt to finance its deficit, though the country does not have much monetary-policy flexibility given the riyal’s peg to the U.S. dollar.

“The outlook remains negative, reflecting the challenge of reversing the marked deterioration in Saudi Arabia’s fiscal balance,” said S&P.

Source: MarketWatch