Another A+ from Fitch

Fitch Ratings affirmed Saudi Arabia’s long-term foreign-currency issuer default rating at A+ with a stable outlook, citing its robust fiscal position and strong external balance sheets, it said in a note on Thursday.

Behind the rating: Fitch said the “government’s debt-to-GDP [ratio] and sovereign net foreign assets are considerably stronger than both the A and AA medians.” It also cited “significant fiscal buffers” in deposits and other public sector assets.

The same challenges persist: The ratings agency repeated its assessment from February 2024 that “oil dependence, low World Bank governance indicators and vulnerability to geopolitical shocks remain relative weaknesses.” Still, governance is improving as policymakers push ahead with social and economic reforms and cabinet works to strengthen the effectiveness of state agencies and institutions.

Oil recovery will boost growth, but lower prices could increase deficits: Oil production is set to recover as Opec+ cuts are gradually lifted, which will underpin 2.7% growth in the oil sector in 2025, and 6.4% in 2026, Fitch projects. However, lower crude prices — forecasted at USD 70 per barrel in 2025 — are expected to reduce oil revenues, causing the 2025 budget deficit to widen to 3.8% of the Kingdom’s GDP. This is higher than the government target of 2.3% for 2025 and the 2.8% estimated in 2024.

The deficits could weaken external balance sheets: Government expenditure needs might drive an increase in external borrowing. Meanwhile, domestic investments are also expected to overshadow foreign asset acquisitions, in line with the government’s targets to boost investments inside the Kingdom and as the Public Investment Fund shifts its strategy to focus on domestic investments.

A “strong and resilient” non-oil sector: Fitch projects non-oil growth in 2025 and 2026 to come in at “a similar pace” as 2024 — where growth recorded 4.3% — driven by reforms and government investments, while maintaining resilience to declining oil prices.

Geopolitical risks are waning: Regional conflicts seem to be less of a risk to the Kingdom as things stand currently, with the country set to play an active role in reconstruction efforts across the region. Geopolitical factors had no substantial impact on the Saudi economy in 2024, Fitch argues.

Major changes could affect ratings in the medium-term, including a debt-to-GDP ratio far above Fitch forecasts, lack of productive investments in the Kingdom’s economy, or a major geopolitical escalation over an extended period, Fitch said.