RIYADH — Ratings Agency Fitch on Thursday confirmed its rating for Saudi Arabia at (A) and changed the future outlook from negative to stable, making the Kingdom among the few countries in the world that have been able to modify the future outlook of their credit rating. Fitch cited Saudi Arabia's economic reforms and measures to contain the pandemic and its repercussions for the outlook revision. In its report, the said that its decision to adjust the Kingdom's future outlook was a result of expectations of a decrease in the public budget deficit, compared to its previous report last November, citing the Kingdom's continued commitment to controlling public financial conditions, and keenness to implement structural reforms and plans to diversify the economy, in addition to the improvement in oil prices which led to the reduction of the fiscal deficit during the first quarter of this year. The agency's report also expected the Saudi economy to return to positive growth in 2021 after it witnessed a recess in 2020, in addition to the return of the current account to a surplus level while reducing the deficit rates in the public finances, The projection is also based on improving global macroeconomic conditions and the recovery of oil prices as the world began to recover from the pandemic, especially since the agency had earlier raised its forecast for oil prices for the current year from $58 to $63 per barrel. Furthermore, the agency expected Saudi Arabia's GDP to see a 2.1 percent growth during the current fiscal year compared to a -4.1 percent contraction in 2020. Regarding public finance, the agency lowered its estimates of the deficit in the general budget for the current fiscal year 2021 from 8.4 percent to 3.3 percent as a percentage of GDP, from its previous forecast in December 2020. Fitch's report also estimated that the budget deficit in 2022 will reach approximately -3.8 percent. It has also revised its estimates regarding the current account deficit as a percentage of GDP for the year 2020 to reach -2.8 percent compared to -5.5 percent in its previous estimates. The current account has a surplus of about 2.7 percent of GDP for the fiscal year 2021. The agency noted that Saudi Arabia still possesses strong sovereign assets and high external financial resources despite a decline in recent years. Meanwhile, it reduced its estimates of the size of the public debt of GDP for the year 2021 to 31.1 percent compared to 39.4 percent in its last estimates in December 2020, expecting it to reach around 33.1 percent by 2022. Fitch also said that the Kingdom has more than 20 months of current external payments, one of the highest coverage ratios among the sovereign countries classified by the agency. Commenting on the new rating, Finance Minister Mohammad Al-Jadaan said that Fitch's revision of the future outlook of Saudi Arabia's credit rating to a stable outlook confirms the effectiveness of the positive measures and structural reforms taken by the Kingdom during the past five years achieve the objectives of the Kingdom's Vision 2030. The reform measures positively reflected on the fiscal policy and raised the efficiency of government performance and advanced its comprehensive agenda for economic diversification, Al-Jadaan added. It is worth noting that International Monetary Fund experts, confirmed in Article IV consultations for the year 2021, the continuation of the Saudi economy recovery, as well as the slowdown in the inflation of the consumer price index, expecting the growth of non-oil GDP to reach 4.3 percent during the current year, and 3.6 percent in 2022. The IMF expects the private sector to lead the growth this year to reach 5.8% and continue in the medium and long term with an average growth of 4.8 percent.
