Moody's Investors Service affirmed the government of Saudi Arabia's long-term issuer and senior unsecured ratings at A1 with a stable outlook.
In a recent report about the Saudi economy, Moody’s indicated that the affirmation of Saudi Arabia's A1 ratings is supported by its baseline view that the fiscal consolidation expected at the time of the last rating action will continue over the medium term, ensuring stabilization of the government's debt burden below 30 percent of GDP.
The report added that Moody's continuing expectation that the government's ambitious structural reform agenda will, over time, reduce the exposure of Saudi Arabia's economy and public sector balance sheet to “oil prices, balanced against the associated execution risks given the large scale of the task at hand and the potentially negative short-term economic and social impact of some of the related measures.”
In addition, Moody’s confirmed A1 rate is due to the government's reform program, including the plans to balance the fiscal budget by 2023, could over time offer a route back to a higher rating level.
However, the report added, social pressures could in the next few years slow or reverse the reform progress in a way that would lead to erosion of Saudi Arabia's fiscal strength beyond current expectations.
Against this increased fiscal headroom, Moody's views that modifications to the fiscal program announced in January 2018 to delay the achievement of a balanced budget to 2023 instead of 2020 “makes the fiscal reform momentum more sustainable, the fiscal targets more realistic, and the overall fiscal consolidation and diversification program more credible.”
Since mid-2014, oil prices have seen a price drop from $114 per barrel to around $26 in January 2016. However, OPEC's plan to cut production in cooperation with non-OPEC members has helped to improve prices to about $70, amid expectation for further rises, supported by strong coordination between Saudi Arabia and Russia.
Saudi Aramco is the world's most profitable oil company, according to global reports on Friday.
On Friday, oil prices rose marking their biggest weekly gain since July 2017 amid geopolitical concerns and reports of a drop in global crude stocks.
