Moody’s affirms Kingdom's rating at ‘A1’

Moody’s Investors Service affirmed on Friday Saudi Arabia's rating at “A1”, but cut its future outlook from stable to negative.

The outlook downgrade was attributed to the risks that the Kingdom may face as a result of fluctuations in the oil price resulting from the coronavirus and the uncertainty resulting from the Kingdom’s dealings to mitigate the effects of these factors, through the balance of debt and oil revenues.

In its credit report, Moody's stressed that the Kingdom's rating is also supported by an effective monetary policy that maintains the credibility of the exchange rate peg, overall financial and economic stability and signs to improve the effectiveness of fiscal policy resulting from structural financial reforms, including a medium-term public financial management framework.

The agency also indicated that plans to diversify the Kingdom’s economy away from oil could contribute to raising growth potential in the medium term.

On the public finance, Moody's raised its estimate for the 2020 budget deficit from 8.7% to 12% as a percentage of GDP.

The size of the public debt as a percentage of GDP is projected to reach 38% for the year 2020 and up to 45% in the medium term, the report added.

Being the world’s second largest oil producer (including natural and condensed gas), with significant oil reserves, in addition to the lowest extraction costs worldwide and the long experience, provides the Kingdom with a high degree of competitive advantage over other oil producers.

Last week, Fitch Ratings confirmed the long-term credit rating of Saudi Arabia at “A” with a stable future outlook.