MANAMA: Saudi Arabia faces the challenge of diversifying the oil-dependent economy to create jobs for a young and growing population, according to Fitch Ratings.
Fitch Ratings has affirmed Saudi Arabia's long-term local and foreign currency issuer default ratings (IDRs) at "AA-", both with stable outlooks. The country ceiling is affirmed at "AA" and the short-term foreign currency IDR at "F1+".
"Saudi Arabia's strengths have come to the fore amid the global slowdown and financial crisis," said Charles Seville, Director in Fitch's sovereign team.
"The financing flexibility offered by the government's balance sheet - built up by saving past oil revenues - has enabled it to forge ahead with spending plans without raising borrowing."
A strong government balance sheet, it said, is one of the chief supports to the ratings. Sovereign net foreign assets were estimated at 132 percent of GDP at end-2009 and are conservatively-managed and valued. Consolidated general government debt was just 6 percent of GDP. In absolute terms, net foreign assets are second only to Japan's in the "AA" category. They are also among the strongest in relation to GDP and current account receipts, but remain weaker compared to other major Gulf Cooperation Council (GCC) oil producers, particularly measured against government spending.
Government external assets, reported monthly on the Saudi Arabia Monetary Authority's (SAMA) balance sheet, fell $65 billion (17.6 percent of GDP) between their peak in November 2008 and their trough in September 2009, from where they have since resumed growth. The central government ran an estimated deficit of 3.3 percent of GDP in 2009, the first since 2002. This performance contrasted with 2008, when a spike in oil revenues allowed the government to run a fiscal surplus of 34 percent of GDP and its external assets grew $140 billion.
