RIYADH: Underlining Saudi Arabia’s robust economic growth, global credit rating agency Standard & Poor’s has reaffirmed its credit rating for the Kingdom in local and foreign currencies to “A/A-1,” with a stable outlook in its recently issued report.
The agency explained the confirmation came against the backdrop of Saudi Arabia’s continued efforts in recent years and its structural improvements that supported the sustainable development of the non-oil sector.
Furthermore, Saudi Arabia’s prudent management of public finances and maintaining a balanced public debt level have also contributed to this rating.
According to S&P, the Kingdom is expected to achieve a 0.2 percent growth in its gross domestic product for the current year, primarily due to reduced oil production.
However, Saudi growth is anticipated to surge at a rate of 3.4 percent between 2024 and 2026. This projected growth is based on an expected increase in orders for oil and a noticeable expansion in the non-oil sector.
“Reforms in the past few years, including measures to drive non-oil economic growth and widen the non-oil tax base, alongside significant social liberalization, should continue to improve Saudi Arabia’s economic and fiscal profile,” said S&P Global in the report.
The US-based credit rating agency noted that the Kingdom’s substantial oil output cuts may slightly dampen its GDP growth in 2023.
The Organization of the Petroleum Exporting Countries and its allies initiated supply restrictions in November 2022 to stabilize the oil market. Saudi Arabia voluntarily reduced output by 500,000 barrels per day in April 2022.
Building on this commitment, Saudi Arabia implemented an additional 1 million bpd cut in June, a decision which was later extended until December 2023.
S&P Global, however, expects strong non-oil growth from 2024 onward to drive the Saudi economy’s rebound, resulting in fiscal surpluses.
“The stable outlook balances our expectation that the government’s reform agenda will continue to underpin the development of the non-oil sector and support non-oil growth and fiscal receipts against the cyclicality of a still hydrocarbon-focused economy, with fiscal and societal pressures tied to a growing population,” added S&P Global.
Furthermore, the credit rating agency said it would consider upgrading Saudi Arabia’s ratings over the next two years if reforms progress further, accompanied by robust real per capita economic growth and fiscal discipline.
Earlier this month, the International Monetary Fund expressed optimism about the Kingdom’s fiscal prospects in the near term, driven by its economic diversification efforts in line with the objectives outlined in Vision 2030.
The IMF also highlighted Saudi Arabia’s ample currency reserves and the stability of its exchange rate peg to the US dollar, which continues to serve the Kingdom’s economy effectively.