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Page added on October 31, 2015

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Saudi Arabia Credit Rating Cut


Saudi Arabia’s credit rating was cut by Standard & Poor’s , which said the decline in oil prices will increase the budget deficit in a country that relies on energy exports for 80 percent of its revenue.

S&P cut the sovereign rating one level to A+, the fifth-highest classification, as it said the biggest OPEC producer’s deficit will increase to 16 percent of gross domestic product this year. The nation’s credit outlook is negative as the decline in oil prices makes it difficult to reverse the fiscal deterioration, S&P said in a statement.

“Credit metrics for oil producers like Saudi Arabia are coming under pressure,” said Steve Hooker, a money manager at Newfleet in Hartford, Connecticut, who helps oversee $12.5 billion of debt. “It’s not likely to reverse until the oil prices go up.”

The widening deficit and a high reliance on energy revenue “point to vulnerabilities in Saudi Arabia’s public finances,” the ratings company said. Brent crude has plunged 27 percent from this year’s high in May amid a persistent global supply glut. Still, public debt in Saudi Arabia is among the world’s lowest, with a gross debt-to-GDP ratio of less than 2 percent in 2014.

“We could lower the ratings within the next two years if Saudi Arabia did not achieve a sizable and sustained reduction in the general government deficit, or its liquid fiscal financial assets fell below 100 percent of GDP,” Trevor Cullinan, a credit analyst at the rating company, said in the statement.

The Saudi Finance Ministry said it “strongly disagrees with S&P’s approach to ratings management in this particular instance.” The downgrade was “driven by fluid market factors rather than changes in the fundamentals of the sovereign,” which “remain strong,” the ministry said in a statement on the website of state-run Saudi Press Agency.

The country is rated Aa3 by Moody’s Investors Service, the equivalent of one step higher than S&P’s new grade. S&P’s classification for Saudi Arabia is the same as Slovakia, Ireland, Bermuda and Israel.

The decline in oil prices comes as Saudi Arabia opens its stock market, the largest in the Arab world, to foreigners for the first time. In June it relaxed rules to allow qualified investors direct access to stocks as part of wider government efforts to reduce the economy’s dependence on crude. The benchmark Tadawul All Share Index has plunged 28 percent from this year’s high in April.

S&P projects that Saudi Arabia’s general government deficit will decline to 10 percent of GDP in 2016, 8 percent in 2017 and 5 percent in 2018. It could widen to more than 20 percent this year after King Salman announced one-time bonuses for public-sector workers following his accession to the throne in January, the International Monetary Fund said this month. The biggest Arab economy may run out of financial assets needed to support spending within five years if the government maintains current policies, it said.


8 Comments on "Saudi Arabia Credit Rating Cut"

  1. penury on Sat, 31st Oct 2015 12:13 pm 

    With an increasing population requiring services to prevent unrest, the prosecution of wars in Yeman, and Syria p;us the cost of maintaining actions in the ongoing religious wars, one rocket from the disidents and SA will become another Syria.

  2. BobInget on Sat, 31st Oct 2015 6:28 pm 

    penury beat me again.
    I can only add, KSA is imploding.
    Iran, Iraq, Russia, Venezuela, may claim credit, some deserved, some not. In any case, time is not on the side of the Royals.

    I foresee a domino effect, Arab Spring #2 spreading over the entire peninsula.

    It may not seem such a big deal to us… but.
    Hiring Catholic mercenaries* to kill Muslims
    in Yemen, may have been the last straw for many on the Arab Street in places like Pakistan
    or Iran.


    My favorite headline today;
    “ISIS takes credit for downing Egyptian airliner
    because Russians are killing Muslims in Syria”

  3. BC on Sat, 31st Oct 2015 7:41 pm 

    The KSA is a de facto failed state. The Anglo-American/NATO imperial military (“crusading infidels”) will occupy the peninsula to “protect the holy cities” and
    bring stability to the region (oil fields and shipping lanes).

    Enlisting the Iranians and Russians (and excluding China) to assist in the objective fits in the context of imperial realpolitik.

  4. makati1 on Sat, 31st Oct 2015 7:52 pm 

    If you remember the burning oil fields of the Gulf War, that may be the future scene in Saudi Arabia soon, IF there is enough petroleum in the water mix they are lifting from the desert…lol.

    The world is reshuffling it’s alliances and many countries are moving East. Today’s election in Turkey is the event to watch. Which way will it go? East or West? We shall see.

  5. Peak Oil Prognosticator on Sat, 31st Oct 2015 9:35 pm 


    Yea I heard rumors that since the Saudi royalty is so paranoid they’ve wired explosives to main oil wells. So in case of an invasion they can blow them up like the Gulf War.

  6. Pennsyguy on Sat, 31st Oct 2015 10:11 pm 

    I read a few years ago from a believable source–I’ve forgotten who–that the Saudis wired dirty nuclear bombs to the wells, pipe lines, etc. That actually makes sense. “If we don’t get the money from our oil, NOBODY GETS IT!”

  7. joe on Sun, 1st Nov 2015 7:29 am 

    The middle east is not imploding, it was always like this. It has been settled since the sykes/pichot agreement created big divided states with strongmen leaders. Then along came the US and decided it was time to break that structure and thought (wrongly) that Islam has no power of its own. Now traditional ideology is taking over, and may even create the Islamic empire that UBL dreamed of.

  8. Davy on Sun, 1st Nov 2015 8:08 am 

    Joe, get out of here, US is a late comer to the ME. We have only made it worse but we did not start the problems. The place has been a mess since the beginning of human civilization. It is the worst placed of any region for the coming die off with depletion of oil, overpopulation and overconsumption, and the worst of climate change effects. What a tragic and soon to be desperate place. People are people and it is sad at that level. Innocent people are going to be chewed up by nature’s wrath because nature could give a shit about humans in this respect. You follow natural laws or you perish. It is as simple as that.

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