S&P raises Saudi Arabia’s rating over ongoing reforms

S&P Global Ratings has upgraded Saudi Arabia’s rating to “A+” from “A” with a stable outlook, citing socioeconomic and capital market reforms.

Strong non-oil growth and rising oil volumes from 2025 will support medium-term growth prospects, it said.

Saudi Arabia’s National Debt Management Centre welcomed the upgrade, saying it would allow the kingdom to issue international bonds and sukuks at more favourable rates.

• Saudi ratings upgraded on continued economic reforms

• SMEs struggle as skills shortages drive up Saudi salaries

• Saudi Arabia forecasts 2025 fiscal deficit of $27bn

The Saudi finance ministry had previously indicated that Saudi Arabia needed to borrow SAR139 billion ($37 billion) in 2025 to cover its budget deficit.

Real GDP growth is expected to average 4 percent over 2025-2028, thanks to continued momentum for investment in the construction and services sectors and growing consumer demand.

Since the launch in 2016 of the Vision 2030 programme, which hopes to diversify the economy away from oil, the country has achieved 87 percent of its 1,064 targets.  

“Phased infrastructure spending, changing consumption patterns and labour market developments will continue to strengthen economic resilience,” S&P said.

The Public Investment Fund (PIF) is likely to invest $40 billion in the local economy every year towards giga/mega projects, the rating agency said. It added that the direct contribution of tourism to GDP almost doubled to 5 percent in 2024 from 2021.

Oil prices are expected to fall to $70 per barrel between 2025 and 2028, from $81 in 2023. The fall in dividends at Saudi Aramco dividends by a third this year will push down oil revenue even more, S&P said.

“We expect the fiscal deficit will widen to 4.8 percent of GDP this year, from 2.8 percent in 2024,” it said.

Despite rising housing prices and some supply pressures, inflation will stay modest at 1.9 percent over the next four years, up slightly 1.7 percent in 2024, S&P predicted.

“Inflation will remain contained, partly owing to price caps and the peg to the US dollar,” it said.