The credit rating agency “Moody’s” updated yesterday evening its credit rating report for the Kingdom of Saudi Arabia at (A1) with a negative outlook, as a result of external shocks due to the emerging corona virus pandemic.
The agency confirmed in its credit report that structural reforms in the Kingdom led to a reduction in the fiscal deficit during the first quarter, and despite the economy’s contraction in the first quarter of this year, the non-oil sector continued to develop and recover, supported by exceptionally strong growth in the development of infrastructure for real estate products. . Especially that one of the drivers of economic recovery, in addition to consumer demand, is the exceptionally strong growth in real estate loans backed by government initiatives within the framework of the Housing Program as one of the Vision 2030 realization programs.
The agency also mentioned in its report that plans to diversify the economy in the Kingdom will contribute to raising growth in the medium to long term. In addition to the structural and organizational reforms that have supported in improving competitiveness, the Kingdom of Saudi Arabia improved in 9 out of 10 areas measured in the Doing Business 2020 report, and its rank rose from 82nd in 2016 to 62nd in 2020 out of 190 countries.
In its report, the agency expected that the Kingdom’s real GDP growth would reach 1.6 percent and 5 percent for the years 2021 and 2022, respectively.
On the public finance front, the agency lowered its estimates of the budget deficit in 2021 from (6.2%) to (4.7%) as a percentage of GDP. It expected the current account surplus for the current year to reach about 3.4% of GDP compared to a deficit of about (2.9%) in its last report. The agency also expected in its report that the size of the Kingdom’s public debt as a percentage of GDP would reach 30.6% and 30.9% for the two years 2021 AD. and 2022 AD, respectively.
On the level of the Kingdom’s general budget, the agency confirmed that the budget figures revealed a clear structural improvement represented in the reduction of the non-oil public finance deficit to its lowest level in more than 6 years.
Moody’s credit rating reflects the positive structural reforms undertaken by the Kingdom during the past five years in accordance with the objectives of the Kingdom’s Vision 2030, which was positively reflected on the performance of monetary and macroeconomic policy, improving the effectiveness of fiscal policy, raising the efficiency of government work, and combating corruption, which came during the implementation of The government has undertaken structural and financial reforms since 2017 and pushed its comprehensive agenda of economic diversification.
The agency noted that the Kingdom is the second largest oil producer (including condensed and natural gas) in the world, and has large oil reserves, in addition to the lowest extraction costs in the world and the long experience that provides the Kingdom with a high degree of competitive advantage over other oil producers.