Saudi Arabia’s fiscal position remains strong

08/10/2017 05:40 AST

Saudi Arabia's external and government balance sheet positions will remain strong over 2017-2020, S&P Global Ratings said in its latest research update on the Kingdom. “We are affirming our 'A-/A-2' foreign and local currency sovereign ratings on

Saudi Arabia,” S&P said, noting that the “stable outlook is based on our expectation that the Saudi authorities will take steps to consolidate public finances and maintain government liquid assets

close to 100% of GDP over the next two years.” On Oct. 6, 2017, S&P Global Ratings affirmed its 'A-/A-2' unsolicited long- and short-term foreign and local currency sovereign credit ratings on the Kingdom of Saudi Arabia. The outlook is stable.

Moreover, S&P said it could raise the ratings if Saudi Arabia's economic growth prospects improved markedly beyond our current assumptions.

S&P forecast that the oil sector's contribution to real economic growth in 2017 and 2018 to be largely flat. However, the non-oil sector growth will likely remain the economic driver but at a subdued 1% in 2017 and 2018, with GDP per capita estimate for 2017 at $21,200.

The report also said the central government balance has significantly improved over the first half of 2017, adding that the 2017 government deficit estimate remains largely unchanged.

The report further said the long-standing currency peg helps to anchor the population's inflation expectations, forecasting that the peg will be maintained. The riyal's long-term real effective appreciation since 2007 has been the most pronounced among all GCC sovereigns.

S&P saw Saudi Arabia's external position as a strength. “We expect Saudi Arabia's liquid external assets, net of external debt, will average about 185% of current account receipts (CARs) over 2017-2020. Gross external financing needs are about 45% of the sum of usable reserves and CARs over 2017-2020, suggesting ample external liquidity.”

Saudi Gazette