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.

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The rationale: “Government debt-to-GDP [ratio] and sovereign net foreign assets [are] considerably stronger than both the A and AA medians,” the agency said, citing “significant fiscal buffers” in deposits and other public sector assets.

Foreign reserves are expected to remain exceptionally large, covering an estimated 12.8 months of external payments in 2025 and providing a significant financial cushion. However, heavy external borrowing and a focus on domestic investment are expected to turn the economy into a net external debtor of 3.4% of GDP by 2027, Fitch said.

The banking sector is looking healthy, boasting by the end of 1Q 2025 a high capital adequacy ratio of 19.3% and the lowest non-performing loans ratio since 2016 at 1.2%. However, rapid credit growth is outpacing deposits, leading to increased external borrowing and a deteriorating — though still small — net foreign asset position, the note said.

Headline GDP growth is forecast to reach 4.3% in 2025 and 4.7% in 2026, driven by both oil production increases and a buoyant non-oil sector. The non-oil private sector now accounts for 56% of GDP, supported by reforms like the foreign land ownership amendments and the new investment law.

A wider deficit: Fitch forecasts that the budget deficit will widen to 4.0% of GDP in 2025 and 4.1% in 2026, primarily due to lower projected oil prices — as the average Brent crude price is expected to hit USD 70 a barrel this year — and reduced dividends from Saudi Aramco. The current account balance is also expected to shift to a deficit of 2.9% of GDP in 2025, before widening further to 4.2% in 2026.

Public debt is also rising: Due to fiscal deficits, government debt is projected to rise to 35.1% of GDP by 2027, compared to 29.7% of GDP this year. “The sovereign is adjusting capex to support the fiscal position, although execution of the large project pipeline and new infrastructure projects will constrain the pace for substantial cuts,” Fitch noted.

Regional geopolitical risks remain high: Recent hostilities have not significantly impacted economic activity, but the potential for disruption to key infrastructure, such as the Strait of Hormuz, remains a vulnerability, said Fitch.

What could move the needle? A downgrade could be triggered by significant fiscal deterioration, driven by a rising debt, contingent liabilities, or a major geopolitical shock. An upgrade would require successful economic and fiscal reforms that reduce oil dependency or a sustained oil price boom that strengthens the Kingdom’s balance sheets, Fitch said.

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