Saudi Arabia’s robust economy is clearly due for a further rating upgrade and this should take place sooner rather than later, says a top Riyadh-based economist.

“The economy is on a solid footing and the rating agencies should take note of this and hopefully upgrade Saudi Arabia a notch up,” said John Sfakianakis, chief investment strategist at MASIC, a Riyadh-based investment firm.

His comments came as Fitch Ratings upgraded Saudi Arabia’s long-term foreign and local currency Issuer Default Ratings (IDR) to ‘AA’ from ‘AA-’. The outlooks are stable.

The Country Ceiling has been upgraded to ‘AA+’ from ‘AA’ and the short-term foreign currency IDR has been affirmed at ‘F1+’.

Paul Gamble, director, Sovereign Group, FitchRatings, explained: Saudi Arabia is two notches from AAA — i.e. the rating category above AA is AA+. AAA is the next category above AA+.”

Finance Minister Ibrahim Al-Assaf, in a statement, said he was happy with the upgrade of credit rating which boosted confidence in the Saudi national economy and highlight the credit strength of the Kingdom.

The Saudi government is proceeding with its plans to diversify income coupled with cementing its financial status, he said.

Al-Assaf said Saudi Arabia was also investing heavily in infrastructure projects, economic development, education, health, housing and transportation.

Saudi Arabian Monetary Agency Gov. Fahad Al-Mubarak said the upgrade of credit rating reflecting the “sound approach” of the Saudi government in the management of economic and financial affairs.

The Fitch statement said the strong sovereign and external balance sheets have been bolstered.

The net creditor position is the strongest of all Fitch-rated sovereigns bar Macao, with government deposits in the banking sector rising to 58.7 percent of GDP at end-2013 compared with general government debt of just 0.6 percent of GDP.

Sfakianakis said: “Usually rating agencies want to see sustainability on both internal and external accounts and issues such as labor (Saudization) and unemployment. Improvements are made and the nonoil economy has been expanding, no doubt.”

A regional economist, who requested anonymity, said: “Things are moving in the right direction with government reforms and diversification. However, the longer-term fiscal position has vulnerabilities because of the rapidly growing domestic oil consumption and the dependency of the fiscal system on oil. This means that the current status could change, potentially quite quickly. More predictability required for AAA.”

Basil Al-Ghalayini, CEO of BMG Financial Group, said: “Saudi Arabia, over the years, have enjoyed stable fiscal and monetary policies coupled with iron fisted control of the banking system which saved it from the global crisis.”

He added: “Also, the labor market reforms will have its long term positive impact on the economy from different aspects. All these factors, assuming the world oil market will maintain its current levels, will prepare the Saudi economy for a healthy platform for a further rating upgrade.”

Fitch Ratings said the net creditor position is the strongest of all Fitch-rated sovereigns bar Macao, with government deposits in the banking sector rising to 58.7 percent of GDP at end-2013 compared with general government debt of just 0.6 percent of GDP.

Net external assets climbed to over 100 percent of GDP at end-2013, well in excess of the peer median and the position of Kuwait and Abu Dhabi (both AA/Stable).

Authorities had continued to take steps to address unemployment and a shortage of affordable housing, both of which Fitch considers potential economic sources of social instability.

Fitch said labor market reform has continued, with a normalization of the status of expatriate workers (achieved through a change in the work visas of around four million expatriates to correct their employment status and the repatriation of around one million illegal workers) and efforts to increase the participation of nationals in the labor force.

Saudi employment in the private sector increased significantly in 2013, Fitch Ratings added.