S&P Downgrades Saudi, Riyadh Rejects Assessment

Ratings agency S&P on 30 October lowered its foreign and local currency sovereign credit ratings on Saudi Arabia one notch to A+/A-1 from AA-/A-1 and kept the outlook negative. S&P says it expects Riyadh’s fiscal deficit to soar from 1.5% of GDP in 2014 to 16% in 2015, “primarily reflecting the sharp drop in oil prices.” As the agency notes, crude oil and its derivatives account for about 80% of Saudi Arabia’s revenues.

In retaining a negative outlook for Saudi Arabia S&P is “reflecting the challenge of reversing the marked deterioration” in the fiscal balance. It adds that it could lower the rating further within the next two years if the government does not achieve a sizeable and sustained reduction in the fiscal deficit, or if Saudi fiscal financial assets fall below 100% of GDP. The ratings could also come under pressure “if domestic or regional events compromized political and economic stability, the agency says. (CONTINUED - 1009 WORDS)