Government’s "credit positive" reform programme - including plans to balance the fiscal budget by 2023 - could offer "a route back to a higher rating level", agency says
Saudi Arabia's deficit to narrow this year and kingdom to maintain 'stable' fiscal position, says Moody’s
Saudi Arabia will narrow its budget deficit to 160 billion Saudi riyals (Dh156.69bn) in 2018 from the initial budget projection of 195bn riyals for the year, as the country maintains a balanced credit profile and stable outlook, Moody’s rating agency said.
"Although the decline in oil prices since then  has pushed the budget balance into deficit, the government's overall balance sheet remains robust," the rating agency said on Wednesday in its annual credit analysis report on Saudi Arabia.
After shrinking to 5.8 per cent of gross domestic product by the end of this year, the budget deficit is forecast to narrow further to 5.2 per cent in 2019, on an assumption that oil prices will average $60 per barrel in 2018, Moody’s said.
Last month, Moody’s affirmed an 'A1 stable' investment grade credit rating for the kingdom, based on structural strengths including: a strong fiscal position; substantial external liquidity buffers; a large stock of proved oil reserves combined with low extraction costs; and prudent financial system regulation.
In its latest report, Moody’s said overall real GDP growth would probably remain below 2 per cent over the period 2018-2022 - markedly lower than the 4.6 per cent growth rate recorded during 2011-2016.
The government debt burden will continue to rise as a share of GDP from 17.3 per cent at the end of 2017 but will peak below 30 per cent of GDP over the next five years, Moody’s added.
Over time, the government’s "credit positive" reform programme - including plans to balance the fiscal budget by 2023 - could offer "a route back to a higher rating level", according to the report.
In particular, strong growth in oil revenues up until 2014 allowed the government to build up a sizeable asset cushion and sharply reduce debt. This has given the kingdom a "robust" base from which to continue balancing its economy.
With a nominal GDP of $684bn in 2017, Saudi Arabia’s economy is more than three times the size of the median for A-rated countries, said Moody’s.