The COVID-19 implications and oil price shock have resulted in a credit rating adjustment cycle of an unprecedented scale and speed. Rating Agencies have taken over 215 negative rating actions since March 9, with almost 80% of reviewed commodity producers being adversely affected and over 100 downgrades globally. Fitch Monday affirmed Saudi Arabia's A rating, while revising the outlook to negative from stable amidst this unprecedented global shock. Despite the negative outlook, the Kingdom's ratings have demonstrated notable resilience with three consecutive rating affirmations by the three major Credit Rating Agencies since the onset of the crisis in March 2020. Exceptional balance sheet strength and a track record of policy flexibility place Saudi Arabia in a favorable position to front these shocks. The government has articulated a strong official response with a comprehensive and targeted stimulus, reflecting solid institutional capacity, preparedness, and policy coordination. Saudi Arabia's economic support has proven more effective vis-à-vis peers, with the contraction in 2020 expected to be less severe than the G20 median, despite a significantly smaller support package (IMF estimates). Stimulus measures have played a critical role in cushioning the impact on the private sector and households, within the realm of fiscal prudency and ample fiscal space. The government's commitment to medium-term consolidation and fiscal sustainability remains strong, and has been reinforced by swift implementation of structural fiscal measures. These measures have been acknowledged by Fitch as follows: "The government has taken a number of structural fiscal measures this year to limit the impact of lower oil prices and the coronavirus pandemic on public finances, demonstrating its commitment to fiscal consolidation." The Kingdom's consolidation drive has structurally enhanced public finances and led to a remarkable revenue expansion. Effective governance and enhanced transparency have underpinned unprecedented reform implementation and support ongoing economic diversification in the Kingdom, which along with the solid pipeline of investments led by the PIF and NDF, reinforce medium-term growth prospects and a swift recovery in 2021. The government is confident that Saudi Arabia will be able to successfully overcome the current crisis. Fitch confirmed that Saudi Arabia had amongst the strongest balance sheets for the rated countries, including one of the largest foreign reserves in the world. Fitch also reduced its estimates on public debt from 38% of GDP in April to 35% of GDP for 2020. — SPA
