S&P Global Ratings has affirmed Saudi Arabia’s rating at “A-/A-1” with a stable outlook and said the kingdom would return to fiscal surpluses in 2024 on higher crude production as well as growth in its non-oil economy.
The A-/A-1 rating indicates the obligor's strong capacity to meet its financial commitments.
“Reforms in the past few years, including measures to drive non-oil economic growth and widen the non-oil tax base, alongside significant social liberalisation, should continue to improve Saudi Arabia's economic and fiscal profile,” the rating agency said on Friday.
Saudi Arabia's economy grew by 1.2 per cent in the second quarter of this year, a slightly faster pace than the initial estimates, driven by a sharp expansion in the non-oil sector of the Arab world's biggest economy.
The kingdom’s gross domestic product at current prices reached 970 billion riyals ($258.66 billion) in the three months to the end of June, the General Authority for Statistics said earlier this month.
The non-oil sector grew by 6.1 per cent on an annual basis, beating the Gastat initial estimate of 5.5 per cent expansion in the three-month period.
This month, Saudi Arabia, Opec’s largest producer, said it would extend its voluntary output cut of 1 million barrels per day until the end of 2023.
“Large cuts in Saudi oil production in 2023 are expected to dampen real GDP growth and drive a fiscal deficit, although increasing production and strong non-oil growth from 2024 onward will lead to a rebound in growth,” S&P said.
Earlier this year, Saudi Arabia received the biggest downgrade in economic growth forecast among the G20 economies by the International Monetary Fund.
The kingdom’s economy is forecast to grow by 1.9 per cent this year, instead of 3.1 per cent as previously projected, largely a reflection of production cuts and lower oil prices.
Growth in the kingdom is expected to pick up to 2.8 per cent in 2024, the Washington-based fund said in its World Economic Outlook update.
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Saudi Crown Prince Mohammed bin Salman is overseeing the kingdom's Vision 2030 economic reform agenda. Reuters -
Riyadh will be ready to welcome 120 million visitors if the Saudi capital is chosen to host Expo 2030, say officials. Bloomberg -
Riyadh skyline. Saudi Arabia's economy grew by 1.2 per cent in the second quarter of this year. EPA -
Guests arrive at the Grand Palais Ephemere for the Riyadh 2030 reception event to promote the city's candidacy for Expo 2030, in Paris. AFP -
Saudi Minister of Tourism Ahmed Al Khateeb with Eva Descarrega, permanent delegate for Andorra to UN cultural agency Unesco. -
Officials from the Bureau International des Expositions, which oversees the World Expo, with Jerry Inzerillo, chief executive of Diriyah Gate Development Authority, near Riyadh. -
Saudi Arabia has outlined ambitious plans to develop the capital, including the flagship New Murabba project. SPA -
The project will cover 19 square kilometres, centred on a large cube-shaped structure, rendered above, known as the Mukaab. -
The New Murabba Development Company's project will include a museum, a technology and design university, a multipurpose immersive theatre and more than 80 cultural and entertainment venues. -
The historic Al Masmak fort in Riyadh is one of the city's current tourist attractions and home to a museum. Getty -
Work by Saudi artist Ali Al Ruzaiza projected on Masmak Fort during the Noor Riyadh festival. Photo: Noor Riyadh -
Football legend Lionel Messi and his wife Antonela Roccuzzo visiting Diriyah in May. AFP -
The kingdom recently launched a new carrier, Riyadh Air. Photo: Riyadh Air
However, oil prices have risen significantly in recent weeks as crude supplies tighten and China introduces stimulus measures to revive growth in the world’s second-largest economy.
Brent crude, the benchmark for two thirds of the world’s oil, has gained more than 30 per cent since falling to a low of $71.84 a barrel this year.
Opec expects crude demand to rise by 2.4 million bpd to 102.1 million bpd this year. Next year, world oil demand is forecast to expand by 2.2 million bpd to 104.3 million bpd.
Saudi Arabia’s economy is forecast to receive a boost from the strong performance of its non-oil private sector as the kingdom continues to diversify its economy away from oil as part of its Vision 2030 plan, S&P said.
Inflation in Saudi Arabia also remains relatively low compared with that of its peers. It is forecast to remain under control owing to supply-side subsidies on fuel and food, as well as a peg to the relatively strong US dollar.
“The non-oil sector is forecast to remain strong in 2023-2026, with contributions from strong service-sector growth, supported by consumer demand, significant ongoing social liberalisation, and a growing female workforce,” the agency said.
The kingdom will also continue to benefit from large investment projects in the pipeline, which are primarily funded by the Public Investment Fund and the National Development Fund, it added.
