Ashraf AboArafe
The Media Office of the Saudi Embassy in Cairo – Sunday, March 28, 2021 AD
It was reported by ‘S&P Credit Rating Agency’ has affirmed Saudi Arabia’s credit rating at “A-” with a stable outlook.
It said in a statement that after the recession in the year 2020 AD, the Saudi economy is expected to return to positive growth in 2021 AD, and it also expects the level of the current account to return to the surplus with the reduction of the deficit ratios in the public finances, based on the improvement of global macroeconomic conditions and the recovery Oil prices as the world begins to emerge from the pandemic.
The agency stated that the Saudi government continues to achieve the ambitious 2030 vision of the Kingdom that was announced in 2016, noting that many important achievements have been made in relation to social reforms and increasing women’s rights.
The stable outlook indicates that the agency expects the financial position and net foreign assets over the next two years to remain strong enough to support the credit rating, marching that the kingdom still has strong sovereign assets.
She stated that Saudi Arabia is the only country in the world that maintains a large capacity to export surplus oil and is thus able to increase (or reduce) production by about 2 million barrels per day within days. Combined with its large production capacity and its leading role in the oil markets and OPEC, this provides it with some supply-side pricing power and financial flexibility that is not available to other oil producers.
In terms of public finances, the Agency reduced its estimates regarding the deficit in the 2020 budget from (14.1)% to (11.2)% as a percentage of GDP, compared to its last report in September 2020. The agency estimates that the budget deficit for the fiscal year 2021 will be around (5)%.
The agency also indicated that the Kingdom is one of the few countries in the region that has implemented strong structural reforms in terms of public finances, including the application of value-added tax, as it has contributed significantly to the growth of non-oil revenues, which reached about half of the total revenues in the year 2020 AD, and the agency revised its estimates. Concerning the current account deficit as a percentage of the GDP for the fiscal year 2020 AD to reach (2.3)% compared to (8.7)% in its previous report, and the agency estimates that the current account will achieve a surplus of about 4.8% of the GDP for the fiscal year 2021 AD, while the agency lowered its estimate of the size of the debt The year as a percentage of the GDP for the year 2021 AD to 30.2% compared to 38.2% in its last report in September 2020 AD, and the agency estimates that it will reach about 41% by the year 2024 AD.
The agency expects the real GDP growth of the Kingdom’s economy by about 2% for the current fiscal year, compared to a contraction in 2020 by about 4.1%.
The agency also drew attention to the fact that the government is expected to support local capital expenditures and finance major projects through the Public Investment Fund and the National Development Fund, as the Public Investment Fund has indicated that it has assets worth $ 400 billion and plans to grow it to $ 1.1 trillion by 2025 AD, as well. It aims to invest at least $ 40 billion annually in the local economy.
