“We base our outlook revision on our view that, although real economic growth remains relatively strong, we think Saudi Arabia is unlikely to achieve sufficient levels of nominal income to raise the ratings over the next two years,” S&P announced in a statement late on Friday, and published by ArabNews on Sunday.
The agency went on to say that based on an estimate of Brent oil being priced at $80 per barrel in 2015, and $85 in subsequent years, it has revised down its GDP assumptions from the $25,600 per capita it estimated in June to $23,400 in 2014-17. The kingdom derives around 45% of its GDP from the hydrocarbon sector, S&P noted, but added that during periods of high oil revenue it had paid off almost all its debt and was well-placed for countercyclical policies.
“The stable outlook reflects our view that Saudi Arabia will keep its very strong fiscal balance sheet and net external asset position, while monetary policy flexibility remains limited and dependence on income from the hydrocarbons sector stays high,” the agency stated. At the same time, it affirmed its "AA-/A-1+" long- and short-term foreign and local currency sovereign credit ratings for the kingdom.
The agency also affirmed the Sultanate’s 'A/A-1' long- and short-term foreign and local currency sovereign credit ratings, citing the country’s strong net external and general government asset positions, but warned that its limited monetary flexibility (due to an exchange rate that is pegged to the dollar), and the moderate quality of it public institutions were reasons for caution.