S&P raises Saudi Arabia's rating to A+ on economic overhaul
Global ratings agency S&P raised Saudi Arabia's long-term sovereign credit rating a notch up to 'A+' from 'A' based on the ongoing social and economic transformation in line with the Vision 2030 programme.
The upgrade is underpinned by improving governance effectiveness and institutional settings, including deepening domestic capital markets, the rating agency said.
S&P upgrades Saudi credit rating
'We believe that institutional checks and balances have become more visible as Vision 2030 progresses, as reflected by the recalibration of project priorities and timelines,' said Zahabia Gupta, Director and Lead Analyst for Middle East and Central Asia, S&P.
The rating agency kept the outlook stable, thanks to strong non-oil growth momentum and developing domestic capital markets.
S&P, however, said it expected that the current sensitivity to oil prices will weaken fiscal and external imbalances through 2028.
'We assume that oil prices will fall to $70 per barrel over 2025-2028, from $81 per barrel in 2023,' Gupta said.
The announcement of a decline in Saudi Aramco dividends by one-third in 2025 will further dampen oil revenue.
'We expect the fiscal deficit will widen to 4.8 per cent of GDP this year, from 2.8 per cent in 2024,' she said.
Meanwhile, strong non-oil growth and rising oil volumes from 2025 will support medium-term growth prospects.
'We project strong real GDP growth averaging 4 per cent over 2025-2028,' Gupta said.
As OPEC Plus production quotas ease from April, S&P forecasts Saudi oil production to increase to above 10 million barrels per day (bpd) by 2028.
This level is still far below the full capacity of about 12 million bpd.
Although Saudi Aramco has suspended plans to increase its maximum sustainable capacity, it will continue investing in the four oil fields in Dammam, Berri, Marjan, and Zuluf and developing shale capacity via the Jafurah unconventional gas field.
The oil sector is also directly and indirectly funding Vision 2030, through exceptional performance-linked dividends and listings.
A secondary listing of Aramco in June 2024 helped to raise $12.4 billion for a 0.7 per cent stake and followed earlier large stake transfers to the Public Investment Fund (PIF) and its subsidiaries.
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