S&P revises Saudi Arabia's outlook to positive, affirms 'A/A-1' ratings

13/09/2024 12:42 AST

S&P Global Ratings has revised its outlook on Saudi Arabia to positive from stable and affirmed its 'A/A-1' long- and short-term foreign and local currency unsolicited sovereign credit ratings. The transfer and convertibility (T&C) assessment remains at 'A+'.

The positive outlook reflects the potential for Saudi Arabia's ongoing Vision 2030 reforms and investments to support the development of the non-oil economy while maintaining sustainable public finances. The revision acknowledges Saudi Arabia's strong non-oil growth prospects and economic resilience despite volatility in the hydrocarbon sector.

S&P Global Ratings has revised Saudi Arabia's outlook to positive due to the country's continued execution of Vision 2030 initiatives, which are expected to bolster non-oil growth over the medium term. The ratings agency also affirmed the 'A/A-1' ratings for Saudi Arabia.

The positive outlook indicates that if reforms lead to steady GDP per capita growth and continued momentum in non-oil sectors, there may be a potential rating upgrade. Additionally, improvements in institutions that support economic transformation and domestic capital markets could further benefit the ratings.

Ratings could be raised if reforms result in consistent GDP per capita growth, supported by sustained non-oil growth. Effective implementation of economic transformation and development of domestic capital markets may also positively influence the ratings.

The revision to a positive outlook reflects Saudi Arabia's strong economic performance and its significant economic and social transformation under Vision 2030. The Kingdom is diversifying away from oil dependency by investing in new sectors such as tourism, manufacturing, and logistics. Despite large funding requirements for Vision 2030 projects, Saudi Arabia's net asset position is expected to remain strong, exceeding 40% of GDP through 2027.

Saudi Arabia is expected to see continued non-oil growth, with strong performance anticipated in sectors like tourism and construction. Investments totaling over $1 trillion are anticipated to drive this diversification. The Public Investment Fund (PIF) plays a key role in funding these projects, with aims to increase assets under management to $1 trillion by 2025.

Fiscal deficits are projected to average 2.4% of GDP through 2027. Public investment will be a major driver of government spending growth. The government is expected to manage deficits through external debt issuances, including Eurobonds and sukuk. Despite increasing debt, Saudi Arabia's net government asset position remains robust, with gross general government debt projected to rise gradually.

Saudi Arabia's role as a major oil exporter and its leadership in OPEC+ provide resilience against global energy transitions. The Kingdom's economic strategy includes maintaining its position as a swing oil producer while advancing its diversification efforts.

S&P's outlook revision highlights confidence in Saudi Arabia's economic reforms and long-term growth prospects.

Saudi Gazette