S&P Global Ratings has updated its credit report for the Kingdom of Saudi Arabia, according to a report by the Saudi Press Agency. The rating agency has upgraded the country’s long and short-term foreign and local currency sovereign credit ratings to ‘A/A-1’ with a stable outlook. This comes as a result of the significant reforms carried out by the Kingdom in recent years, which have contributed to the sustained development of the non-oil sector, improved public finance management, and maintained a balanced public debt level.
The agency noted the strong real GDP growth of 8.7 percent in 2022, which is the highest among the G-20 economies. It also expects moderate economic growth, averaging 2.6 percent in 2023-2026, with GDP/capita averaging US$31,500 – significantly above pre-pandemic levels.
Furthermore, S&P forecasts that the non-oil sector will remain strong through 2026 due to service sector growth supported by significant ongoing social reforms and female workforce participation. The agency also expects fiscal surpluses to continue through 2024, after reaching 2.5 percent of GDP in 2022.
According to the report, inflation in Saudi Arabia is relatively low compared to its peers. The government’s efforts in subsidizing fuel and food, as well as the currency peg to the relatively strong U.S. dollar, are expected to keep inflation under control.
The credit rating upgrade is a testament to the successful economic reforms implemented by Saudi Arabia in recent years. The country has undertaken an ambitious agenda to diversify its economy away from oil, with a focus on developing the non-oil sector. The government has also taken steps to improve public finance management, including the introduction of VAT and the establishment of the Debt Management Office.
Moreover, the government’s ongoing social reforms, including the recent decision to allow women to drive and the creation of new entertainment options, are expected to have a positive impact on the economy. The participation of women in the workforce is also expected to increase, further supporting the growth of the non-oil sector.
Overall, the credit rating upgrade is expected to provide a boost to investor confidence in Saudi Arabia, as the country continues its economic transformation. The Kingdom has been making significant progress in recent years, and this latest credit rating upgrade is a testament to the success of its efforts.