DUBAI: The Saudi economy is forecast to return to positive growth this year and the fiscal deficit will narrow as the global economy emerges from the coronavirus pandemic, S&P Global Ratings said as it affirmed the Kingdom's credit rating at “A-/A-2” with a stable outlook.
Saudi Arabia’s real GDP growth is expected to average 2.3 percent from 2021 to 2024, the report said, adding its rating was supported by a strong net asset position on both its fiscal and external balances.
The COVID-19 pandemic as well as dwindling oil prices and demand led to a sharp contraction for the Saudi economy in 2020, but a strengthening global economy and higher oil prices will support the Kingdom's growth this year, S&P said.
“Both crude and exports such as plastic and petrochemicals will benefit from a rebound in global demand, especially from China and the US,” it said.
Upside risks to S&P's outlook include higher than expected GDP growth or a reversal of the government's declining net asset position. Downside risks include greater fiscal weakness than forecast, a sharp decline in Saudi Arabia's external balances or geopolitical threats to the oil sector.
“Despite running fiscal deficits, we forecast that the overall general government net asset stock (the excess of liquid fiscal financial assets over government debt) position will average 51 percent of GDP in 2021-2024,” it said.
