Moody’s raises Saudi Arabia’s credit rating with a positive outlook Economy

Moody’s raised Saudi Arabia’s credit rating in local and foreign currencies to “AI1” from “AI2”, citing increased predictability of government policies and decision-making processes affecting the private sector.

The agency noted that Saudi Arabia, the largest exporter of crude oil in the world, has non-oil economic growth as a top priority, and the government has accelerated policies to stimulate investment in tourism and expand the private sector.

Moody’s said in a statement that the change in rating reflects “increased predictability of policies and decision-making processes affecting non-governmental issuers in light of institutional improvements.”

It added that the “zero gap” between the foreign and local currency denominations is supported by the central bank’s very large foreign exchange reserves, and reflects very low conversion and convertibility risks.

However, it attributed the reliance on a single source of income for both the private and government sectors and difficult regional geopolitical drivers to the “three-notch gap” between the local currency credit rating and the A1 sovereign rating.

The agency confirmed in its report that the Kingdom’s classification was in line with the tangible progress the government has achieved in comprehensive reforms since 2016, and the effectiveness of its financial and macroeconomic policy, which were supportive of the sustainability of economic diversification.

Moody’s expected in its report that the continued implementation of various large projects will support the growth of real non-oil GDP, as they are characterized by precision and modularity in their design and marketing in specific stages, which enhances their effectiveness and facilitates their implementation.

The agency stated that the positive outlook reflects reforms and investments in a number of non-oil sectors, which will lead to a significant decrease in economic and financial dependence on oil over time.

Moody’s also touched on the Kingdom’s growing economy, the government’s efforts in institutional development and improving the effectiveness of policies, the Kingdom’s strong financial position and large foreign currency reserves.

Last March, Standard & Poor’s credit rating agency confirmed Saudi Arabia’s sovereign rating and its future outlook, which is betting on economic reforms to improve the country’s prospects.
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