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Fitch Ratings has affirmed Saudi Arabia’s long-term foreign and local currency issuer default ratings (IDR) at AA, with outlook stable.
Fitch says that its rating reflects Saudi Arabia’s substantial external and fiscal buffers which provide key support at a time of lower oil prices. But it notes that sovereign and foreign assets have declined since peaking at 114% of GDP at the end of August and are expected to be drawn down in 2015-16. The net foreign assets however will remain at over 100% of GDP at end-2016.
The agency adds that lower oil prices, coupled with the spending package announced by the new King Salman (costing 4.3% of forecast 2015 GDP) will push the general government deficit into double digits (as a % of GDP) in 2015. Fitch calculates the deficit in 2014 at 1.9% of GDP, while overspending especially on key projects and foreign assistance has lifted the fiscal breakeven oil price to an estimated $102/B ($63/B excluding capital spending). (CONTINUED - 309 WORDS)