Saudi Arabia’s rating is downgraded by Moody’s

Moody’s Investors Service has today downgraded the Government of Saudi Arabia’s long-term issuer ratings to A1 from Aa3 and assigned a stable outlook. Today’s rating action concludes the review for downgrade which Moody’s initiated on 4 March 2016.

The downgrade of Saudi Arabia’s rating reflects Moody’s view that lower oil prices have led to a material deterioration in Saudi Arabia’s credit profile. A combination of lower growth, higher debt levels and smaller domestic and external buffers leave the Kingdom less well positioned to weather future shocks.

The stable outlook indicates that, at this lower rating level, risks are broadly balanced. In the absence of further fiscal and economic reform, the pressures on the government’s balance sheet would continue to rise. However, the government has ambitious and comprehensive plans to diversify both the economy and its balance sheet which, if even partly successful, should stabilize its credit profile and which could, if achieved, offer a route back to a higher rating level over time.

As part of today’s rating action, Moody’s has also lowered Saudi Arabia’s long-term foreign-currency bond and deposit ceilings to A1 from Aa3, whereas the short-term ceilings remain at Prime-1. Saudi Arabia’s long-term local-currency country risk ceilings were also lowered to A1 from Aa3.

Moody’s Investors Service

 

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