Energy

S&P Cuts Saudi Arabia Rating to A+/A-1, Outlook Negative

Douglas A. McIntyre

Published: October 30, 2015 5:01 pm

Last Updated: January 13, 2020 5:43 pm

The price of oil and Saudi Arabia’s inability to support its finances indefinitely in the face of the crude price drop have triggered a downgrade by credit rating agency S&P

The announcement:

On Oct. 30, 2015, Standard & Poor’s Ratings Services lowered its unsolicited long- and short-term foreign- and local-currency sovereign credit ratings on the Kingdom of Saudi Arabia to A+/A-1 from AA-/A-1+. The outlook remains negative.

And,

We expect the Kingdom of Saudi Arabia’s (Saudi Arabia’s) general
government fiscal deficit will increase to 16% of GDP in 2015, from 1.5%
in 2014, primarily reflecting the sharp drop in oil prices. Hydrocarbons
account for about 80% of Saudi Arabia’s fiscal revenues.

Absent a rebound in oil prices, we now expect general government deficits
of 10% of GDP in 2016, 8% in 2017, and 5% in 2018, based on planned fiscal
consolidation measures.

We are therefore lowering our foreign- and local-currency sovereign credit
ratings on Saudi Arabia to ‘A+/A-1’ from ‘AA-/A-1+’.

Standard & Poor’s is converting its issuer credit rating on Saudi Arabia
to “unsolicited” following termination by Saudi Arabia of its rating
agreement with Standard & Poor’s.

The outlook remains negative, reflecting the challenge of reversing the
marked deterioration in Saudi Arabia’s fiscal balance. We could lower the
ratings within the next two years if the government did not achieve a
sizable and sustained reduction in the general government deficit or its
liquid fiscal financial assets fell below 100% of GDP.