S&P Global Ratings has affirmed Saudi Arabia's investment grade 'A-/A-2' foreign and local currency ratings, saying the recent shift in social norms and political power may make the region's biggest economy more attractive for investors.
These changes in the kingdom alongside various regional stresses, however, could increase the risk of policy mistakes, which could result in increased domestic and geopolitical tensions, Dubai-based analysts Trevor Cullinan and Benjamin Young said in a report on Tuesday.
"However, we also consider that these structural reforms could empower Saudi citizens and make Saudi Arabia more attractive to investors over the medium term, as the authorities intend," they noted.
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Saudi Arabia's budget deficit narrows in third quarter
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The rating agency maintained the kingdom's stable outlook, based on the expectation that Saudi Arabian authorities will take further measures to consolidate public finances, and ensure that the government's liquid assets are close to 100 per cent of gross domestic product in the next two years.
The kingdom, the world's top oil exporter and Opec's biggest crude producer, has narrowed its budget deficit in the third quarter. Saudi Arabia's rating places it firmly in the middle of investment grade territory at the rating agency, meaning that it is highly unlikely that the kingdom would default on its borrowings.
S&P said that it could lower Saudi Arabia's ratings if it witnessed a deterioration in the country's public finances, which have suffered in recent years from a sharp decline in oil prices. The price of crude lost more than 70 per cent of its value from mid-2014 before rebounding slightly over the past year to reach around current $62 a barrel level.
"We expect the oil sector's contribution to real economic growth in 2017 and 2018 to be largely flat," the analysts said. "Non-oil sector growth will likely remain the economic driver, but at a subdued 1 per cent in 2017 and 2018."
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The President's Cake
Director: Hasan Hadi
Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem
Rating: 4/5
Types of policy
Term life insurance: this is the cheapest and most-popular form of life cover. You pay a regular monthly premium for a pre-agreed period, typically anything between five and 25 years, or possibly longer. If you die within that time, the policy will pay a cash lump sum, which is typically tax-free even outside the UAE. If you die after the policy ends, you do not get anything in return. There is no cash-in value at any time. Once you stop paying premiums, cover stops.
Whole-of-life insurance: as its name suggests, this type of life cover is designed to run for the rest of your life. You pay regular monthly premiums and in return, get a guaranteed cash lump sum whenever you die. As a result, premiums are typically much higher than one term life insurance, although they do not usually increase with age. In some cases, you have to keep up premiums for as long as you live, although there may be a cut-off period, say, at age 80 but it can go as high as 95. There are penalties if you don’t last the course and you may get a lot less than you paid in.
Critical illness cover: this pays a cash lump sum if you suffer from a serious illness such as cancer, heart disease or stroke. Some policies cover as many as 50 different illnesses, although cancer triggers by far the most claims. The payout is designed to cover major financial responsibilities such as a mortgage or children’s education fees if you fall ill and are unable to work. It is cost effective to combine it with life insurance, with the policy paying out once if you either die or suffer a serious illness.
Income protection: this pays a replacement income if you fall ill and are unable to continue working. On the best policies, this will continue either until you recover, or reach retirement age. Unlike critical illness cover, policies will typically pay out for stress and musculoskeletal problems such as back trouble.
