This month’s higher oil prices have contributed to improvements in Saudi Arabia’s sovereign balance sheet, and as a result Fitch Ratings has upgraded the Kingdom’s economic outlook to “positive” from “stable.” According to Fitch, “Government debt/GDP and sovereign net foreign assets will remain considerably stronger than the “A” median, even as these metrics weaken mildly after 2022 as oil prices trend lower offsetting further gradual budgetary reforms.”
The move comes as S&P revised Saudi Arabia’s outlook in March to “positive” from “stable” as well, noting increasing GDP growth and fiscal dynamics over the medium term. S&P affirmed the country’s rating at “A-/A-2.”
In addition to the Kingdom’s sovereign rating, eight Saudi banks’ outlooks were raised to “positive” from “stable,” and their Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) were affirmed at ‘BBB+’. The banks include Riyad Bank, The Saudi British Bank (SABB), Banque Saudi Fransi (BSF), Arab National Bank (ANB), Alinma Bank, Saudi Investment Bank (SAIB), Bank Aljazira (BAJ) and Gulf International Bank – Saudi Arabia (GIB SA).
Further to the upgraded ratings, the International Monetary Fund in April also raised its growth projection for Saudi Arabia by 2.8 percent to 7.6 percent in 2022. Inflation is forecast to register an estimated 2.5 percent in 2022, a decrease from last year and a trend that is predicted to continue in 2023 as well.
Significantly, Saudi Arabia expects to post its first budget surplus in nearly a decade this year by keeping a tight hold on its budget while revenues are boosted by higher crude prices, according to H.E. Mohammed Al-Jadaan, Minister of Finance. In December of last year, Minister Al-Jadaan emphasized, “In total, the numbers are higher than what we used to spend, but the scope is a lot bigger.”
