The international credit rating agency "Fitch" affirmed Saudi Arabia's credit rating at "A" and revised the outlook to stable from negative. This makes the Kingdom, due to its economic reforms and the appropriate policies and processes taken against the fallout of COVID-19 pandemic among only a few countries who had a positive revised credit rating outlook.
According to the Agency, the outlook revision “reflects prospects for a smaller decrease in the budget deficit than at the time of the previous review, owing to significant oil price improvements and continued government commitment to fiscal consolidation and economic reforms".
After the economic contraction in 2020, the agency expected promising signs of an economic recovery in the Kingdom. It is also expected that the current account returns to surplus and a decrease in the budget deficit with the global economic recovery and increase in the oil prices with the pandemic easing. Nevertheless, the agency forecasted r oil prices for this year to be raised from 58 to 63 dollars per barrel.
Fitch forecasts an improvement in the Saudi real GDP of 2.1% compared with a contraction of -4.1% in 2020.
On the public finance side, the agency estimates the budget deficit to narrow this year from -8.4% to -3.3% of GDP compared with their last estimation and -3.8% in 2022.
It revised the current account deficit to reach -2.8% in 2020 as percentage of GDP compared to -5.5% in its last evaluation. And a surplus in the current account with 2.7% in 2021.
The agency affirmed that Saudi Arabia has strong sovereign assets and external financial resources despite their decline in the last few years.
Fitch lowered their estimates for the government debt to reach 31.1% of GDP in 2021, down from 39.4% in its last forecasts in December 2020, and to reach 33.1% in 2023.
Saudi Arabia has one of the highest reserve coverage ratios among Fitch-rated sovereigns at more than 20 months of current external payments.
His Excellency the Minister of Finance, Mr. Mohammed Al-Jadaan, said that this revision of Saudi's outlook by Fitch from negative to stable, affirms the positive reforms that been taken by the government of Saudi Arabia during the last five years through Saudi Vision 2030. Reflecting positively the efficiency of the fiscal policy and an increase in the efficacy of governmental work.
In the last week, IMF staff have reaffirmed the continued recovery of the Saudi economy and the slowdown of the inflation of the Consumer Price Index (CPI), stating that they project the non-oil GDP growth will reach 4.3% this year and 3.6 % in 2022. IMF expects that the private sector will lead the growth this year to reach 5.8%, and it will continue in the medium and long term with an average growth of 4.8%.