The global credit rating agency Fitch has today, Thursday, adjusted Saudi Arabia's outlook to "Stable", citing a significant rise in oil prices and the government's continued commitment to fiscal discipline. Fitch maintained the kingdom's sovereign rating at "A".
The agency noted that Saudi Arabia's external financing remains substantial despite a decline in recent years. Fitch projected that the Saudi budget deficit would shrink to 3.3% of GDP in 2021. The report stated that unemployment among Saudis has decreased since 2020.
Regarding monetary policy, the agency clarified that Saudi Arabia tends to align with oil price trends and expects budget spending to remain robust based on the 2021 budget plans.
In July of this year, the International Monetary Fund (IMF) predicted that Saudi Arabia's economy would recover well from the COVID-19 pandemic, with the kingdom's non-oil economy expected to grow by 4.3% this year, and total real GDP projected to grow by 2.4%.
The IMF added in a statement that real oil GDP is expected to contract by 0.4%, assuming continued oil production under the agreed path among OPEC+ countries. Signs of economic improvement have emerged in Saudi Arabia since late last year.
The IMF stated that the investments from the kingdom's sovereign wealth fund (Public Investment Fund) are expected to offset the negative impact on growth from government spending pressure. The investments from the sovereign fund are a central component of the country's economic development program (Vision 2030), which aims to reduce the economy's dependence on oil.
The statement emphasized that the fund's executives "stressed the importance of public financial monitoring and establishing a strong framework for sovereign asset management in light of the growing role of the Public Investment Fund and public-private partnerships in the economy."
