Fitch downgrades Saudi Arabia, outlook remains ‘negative’

Fitch Ratings has downgraded Saudi Arabia’s long-term foreign and local currency issuers default rating to AA- from AA, and maintained a "negative" outlook on the world's top oil exporter due to regional turmoil and an expected widening of its budget deficit.

“The downward revision of our oil price assumptions for 2016 and 2017 to $35/b and $45/b, respectively, has major negative implications for Saudi Arabia's fiscal and external balances,” the rating agency said Tuesday.

Fitch also forecast the deficit-to-GDP ratio to narrow only marginally in 2016 and, on the back of a moderate recovery in oil prices, more substantially in 2017.

Fitch expected the government debt-to-GDP ratio to rise to 9.4 percent of GDP in 2017 from 1.5 percent in 2014.

“In 2015, the current-account balance recorded a deficit of 8.2 percent of GDP, Saudi Arabia's first since 1998, which we expect to worsen to 14 percent in 2016,” the agency said.

Fitch also affirmed the Saudi Arabia’s Country Ceiling at AA+ and the short-term foreign-currency IDR at F1+.

Fitch considers geopolitical risks high relative to AA- rated peers as the kingdom is involved in military operations in Yemen and Syria.

‘’Control over economic policy making has been concentrated in the hands of Prince Mohamed bin Salman,’’ Fitch said. ‘’This may have contributed to an acceleration of the economic policymaking process, but has also reduced the predictability of decision-making. The degree of support for this accumulation of power from other parts of the royal family is uncertain.’’