Research Update: Saudi Arabia 'A-/A-2' Ratings Affirmed; Outlook Stable

Low oil prices and the COVID-19 pandemic are taking a toll on Saudi Arabia's economy and budget; GDP is forecast to contract by 4.5% in 2020, and the general government fiscal deficit to rise to at 11% of GDP. However, from 2021 onward, GDP growth, oil prices, and oil volume exports are expected to rebound as global conditions improve. Our estimate of Saudi Arabia's relatively strong net asset position on both its fiscal and external balances is still a key support to the rating. Nevertheless, prolonged low oil prices and demand will likely erode its net asset position over the ratings horizon. In our view, the balance of risks is appropriate at the current rating. We are therefore affirming our

...- Low oil prices and the COVID-19 pandemic are taking a toll on Saudi Arabia's economy and budget; GDP is forecast to contract by 4.5% in 2020, and the general government fiscal deficit to rise to at 11% of GDP. However, from 2021 onward, GDP growth, oil prices, and oil volume exports are expected to rebound as global conditions improve. - Our estimate of Saudi Arabia's relatively strong net asset position on both its fiscal and external balances is still a key support to the rating. Nevertheless, prolonged low oil prices and demand will likely erode its net asset position over the ratings horizon. - In our view, the balance of risks is appropriate at the current rating. We are therefore affirming our 'A-/A-2' long- and short-term sovereign credit ratings on Saudi Arabia. - The outlook is stable....

Research Update