Saudi Arabia's (A1 stable) credit strengths include 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, said Moody’s in its annual credit analysis report on Saudi Arabia.

“The stable outlook reflects our view that risks to Saudi Arabia's credit profile are broadly balanced. The government’s reform programme, including the plans to balance the fiscal budget by 2023, could over time offer a route back to a higher rating level,” said Alexander Perjessy, vice president at Moody’s Investors Service.

 “This credit analysis elaborates on Saudi Arabia’s credit profile in terms of economic strength, institutional strength, fiscal strength and susceptibility to event risk, which are the four main analytic factors in our Sovereign Bond Rating methodology,” he added.

 Key takeaways:

•    Strong growth in oil revenues up until 2014 allowed the government to build up a sizeable asset cushion and sharply reduce debt. Although the decline in oil prices since then has pushed the budget balance into deficit, the government's overall balance sheet remains robust.

•    Increasing confidence that structural reforms aimed at reducing the reliance of Saudi Arabia’s economy and public finances on oil revenues are more effective than in our baseline scenario would be credit positive

•    The overall real GDP growth will remain below 2 per cent during 2018-2022, which is markedly lower than the 4.6 per cent growth rate recorded during 2011-16.

•    Moody’s forecasts that 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.

•    Based on the assumption that the Brent oil price averages $60 per barrel in 2018, Moody’s forecasts that the budget deficit will narrow more than assumed in the budget plan to around SR160 billion ($42.6 billion), or 5.8 per cent of GDP, declining further to 5.2 per cent in 2019.

•    With a nominal GDP of $684 billion in 2017, Saudi Arabia’s economy is more than three times the size of the median for A-rated countries. – TradeArabia News Service