Fitch shifts Saudi Arabia view to negative

Fitch Ratings said it revised the outlook on Saudi Arabia’s long-term foreign-currency issuer default rating to negative from stable and affirmed the IDR at A.

The outlook revision on Saudi Arabia’s IDRs reflects the continued weakening of its fiscal and external balance sheets, accelerated by the pandemic and lower oil prices, despite the government’s strong commitment to fiscal consolidation, Fitch said.

“We forecast a decline in the kingdom’s sovereign net foreign assets (SNFA) to 60% of GDP by 2022 from about 72% of GDP in 2019-2020 as a result of debt issuance and reserve drawdowns, and we expect this to trend to continue over the medium term, although SNFA will likely remain higher than the A median,” Fitch said in a press release.

The agency said it forecasts the government budget deficit to widen to 12.8% of GDP in 2020 (equivalent to about $90 billion), from 4.5% of GDP in 2019. The gap reflects a 33% drop in oil revenue, a 5% drop in non-oil revenue and 1% higher spending than last year.

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