Point of no return

16 May 2016 By Andy Critchlow

A cut to its credit rating by Moody’s confirms the kingdom has taken the hard path: reform and low oil prices, with a goal of being diversified away from crude by 2030. A stronger balance sheet requires pricier oil or more reform impetus. The latter is the only real option.

This content is for Subscribers only

Context News

Moody’s Investors Service on May 14 cut Saudi Arabia’s long-term issuer rating by one notch to A1 but gave the kingdom a stable outlook. The ratings agency flagged concern over the country’s future funding needs.

According to Moody’s, Saudi Arabia could require $324 billion of financing to fund a budget deficit expected to average 9.5 percent of gross domestic product between 2016 and 2020.

Saudi Arabia’s economy has been hit by a slump in oil prices over the last two years. Brent crude has fallen almost 56 percent since May 2014.

The downgrade comes after the kingdom’s Deputy Crown Prince Mohammed bin Salman, who is overseeing economic strategy, unveiled his Vision 2030 plan to diversify the country away from dependence on oil.

Email a friend

Please complete the form below.

Required fields *