RIYADH SKYLINE/BLOOMBERG
Fitch Ratings has downgraded Saudi Arabia's long-term foreign-currency issuer default rating (IDR) to ‘A’ from ‘A’ maintaining a stable outlook.
The rating agency stated that the downgrade reflects rising geopolitical tensions in the Gulf region, revising its assessment of the vulnerability of the Kingdom's economic infrastructure and continued deterioration in fiscal and external balance sheets.
The Saudi finance ministry immediately issued a statement saying that the Kingdom was disappointed that Fitch took a swift decision to downgrade the credit rating.
The finance ministry said that the recent attacks highlights Saudi Arabia’s outstanding capacity to effectively deal with adversities as well as the commitment to maintain stability in the global oil markets.
Fitch said that although Saudi Arabia restored oil production fully by the end-September, the is a risk of further attacks on Saudi Arabia could result in economic damage.
The recent attacks on Saudi Arabia's oil infrastructure resulted in the temporary suspension of more than half of the country's oil production.
Saudi Aramco (A+/Stable) has since restored the lost production, demonstrating resilience to the attacks which reflects both the ability to implement rapid repairs and significant spare oil production and processing capacity before the attack.
Additionally, Fitch said that the Kingdom's continued fiscal deficits are a contributing factor to the downgrade.
Fitch expects a fiscal deficit of 6.7 per cent of GDP in 2019 from 5.9 per cent in 2018, reflecting an underlying loosening of fiscal policy in 2018-2019 as well as lower average oil prices and production.
Additionally, Brent oil price is expected to average $65 per barrel in 2019 from $72 in 2018 and Saudi Arabia's oil production will average 9.7 million barrels per day from 10.3 million 2018.
Despite significant structural fiscal reforms to boost the Kingdom’s non-oil revenue as well as reduce subsidies, oil revenue has been the primary factor allowing the government to meet and exceed the fiscal balance programme targets even as the expenditure trajectory has been revised upwards.
MOST READ
ECONOMY
Oman plans to raise $1 billion to plug its...ECONOMY
Refinitiv partners with Complyfin in the UAEECONOMY
Abu Dhabi plans AED 10 billion in PPP tendersECONOMY
US weighs higher tariff ceilings in a bid for...ECONOMY
GCC oil wealth could be over by 2034 without...ECONOMY
Jordan agrees $1.3 billion IMF programmeECONOMY
Expo 2020 Dubai to contribute 1.5 per cent to...ECONOMY
US and China sign phase one of the trade...
CPI Financial was established in Dubai in 1999 to meet the needs of an ever-expanding financial community, offering a comprehensive portfolio of market-leading products and services tailor-made for the banking and financial services sectors.
Loading More post
