Riyadh – Mubasher: Fitch Ratings said on Tuesday it downgraded Saudi Arabia's long-term foreign and local currency issuer default ratings to 'AA-' from 'AA'. It affirmed the country ceiling at 'AA+' and short-term foreign-currency IDR at 'F1+'.
Also, outlooks on the Long-term IDRs remained Negative.
The ratings agency said the downward revision of its oil price assumptions for 2016 and 2017 to $35/b and $45/b, respectively, has major negative implications for Saudi Arabia's fiscal and external balances.
Fitch forecasts the deficit-to-GDP ratio to narrow only marginally in 2016 and, on the back of a moderate recovery in oil prices, more substantially in 2017.
In 2015, the current-account balance recorded a deficit of 8.2% of GDP, Saudi Arabia's first since 1998, which we expect to worsen to 14% in 2016.
The Kingdom’s real GDP grew 3.4% in 2015, supported by a strong expansion of oil production and continued work on major projects, said Fitch, expecting growth to slow to 1.5% in 2016 and 1.7% in 2017.
“We expect oil output to stabilise and non-oil GDP to be hit by fiscal consolidation measures and weaker confidence. Monetary policy remains constrained by the peg to the US dollar, although this provides an important nominal anchor. Despite heightened speculation about devaluation, a change in the peg remains highly unlikely,” said Fitch.
