Saudi Arabia's rating affirmed by S&P as Crown Prince tours US

Riyadh, Saudi Arabia - Saudi Arabia’s credit rating was affirmed by S&P Global Ratings as its heir to the throne, Crown Prince Mohammed bin Salman, is on a three-week tour of the US in search of deals that would diversify his country’s oil-dependent economy.

S&P affirmed Saudi Arabia’s rating at A- and kept the outlook stable. “We expect Saudi Arabia will experience modest economic growth from 2018, supported by rising government investment and, later in our forecast period, a gradual increase in oil production,” the agency said.

Saudi Arabia’s economy contracted 0.5 per cent last year after lower oil prices led to a ballooning budget deficit and shrinking reserves. The Crown Prince’s ambitious development plan - Vision 2030 - seeks to wean the country off oil while privatising stateowned companies, including the sale of a stake of up to five per cent in oil giant Aramco.

S&P last altered its Saudi rating in February 2016, downgrading it to A- as the country wrestled with the rout in oil prices. The kingdom is rated A1 by Moody’s Investors Service and A+ by Fitch Ratings.

Saudi Arabia plans to borrow about US$31bn this year to bridge an expected budget deficit of US$52bn and fund its growth plans. It raised about US$36bn in 2017, US$14bn of which was from domestic bonds and US$22bn from international debt markets. Authorities have so far struggled to raise non-oil revenue.

Saudi dollar bonds were the worst-performing among the 190-member Bloomberg Barclays GCC Credit Index in the first quarter. The kingdom’s bonds due 2046 fell 5.22 per cent, while those due 2047 dropped 4.92 per cent. That compared with an average fall of 2.35 per cent in total returns for sovereign bonds.