S&P affirms Saudi credit ratings amid reform drive

Abaca via Reuters Connect

Global rating agency S&P has affirmed its “A/A-1” long- and short-term foreign and local currency sovereign credit ratings on Saudi Arabia, maintaining a stable outlook. 

The economic and social reforms will continue to improve the kingdom’s financial resilience and wealth levels, as the government’s liquid assets are expected to remain strong at about 70 percent of GDP by 2027, S&P said.

“In the leadup to 2030, we expect to see an acceleration of investment projects that seek to establish new industries, such as tourism, and diversify the economy away from its primary reliance on the upstream hydrocarbon sector.”

The sheer scale and size of projects, such as the $500 billion Neom, indicate large funding requirements across the government and government-related enterprises, particularly the Public Investment Fund. 

“We project that the government’s net asset position will gradually fall but remain comfortably strong through 2027.”

Hence, S&P anticipates projects will be prioritised, with some investments continuing beyond 2030.

Despite a reduction in estimated oil production, the momentum of non-oil growth is likely to propel overall economic expansion to 2.2 percent this year, rebounding from a 0.8 percent contraction last year.

“We expect to see strong growth in construction for Vision 2030 projects and in the services sector, supported by consumer demand and an expanding female workforce,” the rating agency added.