Moody’s, an international credit rating agency, has changed Saudi Arabia’s outlook from ‘negative’ to ‘stable’ while confirming the country’s rating at A1.
The economy of Saudi Arabia will return to positive growth in 2021, the international agency predicted. As the fiscal deficit shrinks in 2021 along with a reduction in the level of debt in the medium term, the current account level will return to surplus, Moody’s noted.
A stable outlook from Moody’s indicates that despite the economic recovery from the COVID-19 pandemic and increased oil prices, the financial position and net external assets of Saudi Arabia remain strong enough to support its credit rating.
In its report, the agency appreciated the Kingdom’s fiscal policies effectiveness, evidenced by policy responses in periods of both low and high oil prices. Moody’s also noted that one of the key pillars of the change in the country’s outlook was the Government’s commitment to medium-term fiscal reforms, including the Fiscal Sustainability Program which aims to enhance fiscal discipline, improve the effectiveness of public finance management, support the rebuilding of fiscal buffers.
Moody’s estimates that the volume of public debt as a percentage of GDP for 2021 will fall below 29 percent and forecasts that it will reach about 25 percent by 2025 from 32.5 percent in 2020.
The agency predicted that the size of public debt to GDP in the coming years would fall between 25 percent and 30 percent, surpassing its estimations for comparable countries with the same credit rating of 35-40 percent.
In addition, the agency commented on the Kingdom’s strength in the oil market displayed in its capacity of producing oil at the lowest costs in the world in comparison with other exporting countries. Such advantage supports the Kingdom’s economic resilience in the environment of low oil prices.
The agency also praised the government’s ongoing economic diversification efforts and increasing the size and share of the non-oil private sector in the economy, supported by major government projects.
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