DUBAI, RIYADH
Saudi Arabia’s credit worthiness was cut one level by Fitch Ratings, which said low oil prices were worsening public and external finances.
Fitch reduced Saudi Arabia’s rating to A+, the fifth-highest investment grade, and changed the outlook to stable from negative, the agency said in a statement on Wednesday. The downgrade reflects “the continued deterioration of public and external balance sheets, the significantly wider than expected fiscal deficit in 2016 and continued doubts about the extent to which the government’s ambitious reform program can be implemented,” Fitch said.
“The primary reason is really the impact on public finances of lower oil prices, even though oil prices have started to come up again,” James McCormack, global head of sovereign ratings at Fitch, said in an interview on Bloomberg Television on Thursday. “The government has a plan to address that so we think the deficit is going to be much lower this year.”
The benchmark Tadawul All Share Index was up 0.5 per cent at 12:33pm in Riyadh.
The downgrade by Fitch “was anticipated,” the Finance Ministry said in an emailed statement. Saudi Arabia’s economic fundamentals are strong, it said. Fitch’s cut puts its Saudi rating on par with that of Moody’s Investors Service. Both classify the kingdom two levels above S&P Global Ratings.
Saudi Arabia, where more than 60 per cent of government revenue last year came from oil, reported a 15 per cent rise in the federal government budget deficit to 17.3 per cent of economic output in 2016, Fitch said. Net foreign assets of the central bank, or the Saudi Arabian Monetary Authority, fell by $49.5 billion, or 7.7 per cent of gross domestic product, between June 2016 and January 2017.
The figure Fitch used for the 2016 budget deficit is higher than the level the government considers official because it includes payments owed to contractors from previous years.
