Saudis earn less than United Arab Emirate (UAE) citizens because the country has not diversified its economy, according to the ratings agency Standard & Poor’s (S&P).

However, it has praised the Kingdom’s investment climate, strong banking system and strict monetary policies that had shielded the country from recent global financial shocks.

Saudi citizens earn on average SR 94,000 a year ($ 25,000). This figure ranks it fourth among Gulf states, it said.

“The position of Saudi Arabia in this ranking of the Gulf states is less than expected,” said S&P. “To improve its ranking requires diversifying the Kingdom’s economy to its nonoil sectors.”

Abu Dhabi and Dubai citizens were ranked the highest earners in the Arab Gulf states.

S&P cited these estimations in a statement released at a press conference in Riyadh recently. It ranked Saudi Arabia AA-stable, fourth in the agency’s rating of Gulf states. However, Minister of Finance Ibrahim Al-Assaf said that the Kingdom deserves a better rating.

The agency ruled out any substantial developments concerning the proposed Gulf currency union because the monetary policies of Gulf states still need to be aligned.

It said the banking system of Saudi Arabia was the strongest worldwide. “The monetary policies of the country, the strict laws and regulations (enforced) by the Saudi Arabian Monetary Agency, which ensured Saudi banks focused on internal investments, contributed largely to its position.”

S&P believes that there is no case for major economic imbalances, such as asset-backed credit bubbles, which pose a great threat to the banking sector. “Saudi banks provide convenient lending standards and offerings. They have a good record in maintaining high indicators of quality,” said the ratings agency.

S&P said there were other risks in the banking sector. This involves Saudi banks transacting with large institutional groups that participate in government-supported projects. “The exposure will be high on one side in light of the limited institutional clients and the poor diversification of the economy.”

As for retail banking, the agency referred to a prominent feature of Saudi banks, of offering personal loans guaranteed by salaries. Meanwhile, household finance constitutes only five percent of private sector credit.

It said the Saudi economy was strong and stable. There was an “average risk” rating for economic resilience, and “low risk” rating for economic imbalances.

In its statement, S&P said that the Saudi Arabian Monetary Agency was effectively managing the banking system by preventing large Saudi banks from taking high risks in very sophisticated products.

SAMA has helped to strengthen the power of capital, credit and credit adjustments in the Kingdom over the years, the statement said. “It applied laws of Basel II in 2008, which led to the existence of strong practices in risk management.”