Moody’s Ratings raises Saudi Arabia’s local & foreign currency ceilings to A1

By Arya M Nair, Official Reporter
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Moody's raises Saudi Arabia to positive outlook

The international credit rating agency, Moody’s has affirmed Saudi Arabia’s credit rating at “A1″ with a positive outlook.

The decision to raise the local and foreign currency ceilings reflects the increased predictability of policies and decision-making processes affecting non-government issuers given institutional improvements.

In the report, the rating affirmation is based on Moody’s assessment of the government’s significant progress achieved in implementing a broad-based reform agenda since 2016 and the track record of macroeconomic and fiscal policy effectiveness that will support the sustainability of economic diversification.

The agency also expects the continued implementation of large diversification projects in the Kingdom will support non-hydrocarbon real GDP growth as they are designed to be modular and commercialized in phases.

Moody’s also mentioned that the positive outlook is a reflection of the reforms and investments in various non-oil sectors that will, over time, lead to a material decline in the Kingdom’s economic and fiscal reliance on hydrocarbons.  

Moody’s also touched on the Kingdom’s large economy, improving institutions and policy effectiveness, robust balance sheet and large foreign currency buffers.

The Agency assessed a three-notch gap between the local-currency ceiling and the A1 sovereign rating which balances relatively predictable institutions and external balance of payments stability against the reliance on a single revenue source for the government and non-government issuers and challenging regional geopolitical dynamics.

The zero-notch gap between the foreign currency ceiling and local currency ceiling reflects very low transfer and convertibility risks, given the central bank’s very large foreign-exchange reserve buffers that support the credibility of the dollar peg, Moody’s analyzed.

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