Friday 29 March 2024
 
»
 
»
Story

S&P cuts Saudi foreign currency rating: report

DUBAI, November 3, 2015

Standard & Poor’s has cut the foreign currency rating of Saudi Arabia by one notch to A+ and kept the outlook on negative, said a Bank of America Merrill Lynch (BofAML) report.

“We had expected a downgrade, but the timing is somewhat surprising as we had anticipated S&P would wait until the 2016 budget is announced in December,” said Jean-Michel Saliba, an economist at BofAML.

“This development could push the Fx (foreign exchange) forward curve higher, in our view. S&P last affirmed the rating in February and downgraded the outlook to negative. The main reason for the downgrade is the large fiscal deficit this year.

“S&P suggests a further downgrade is possible within the next two years if the fiscal situation does not improve materially,” he added.

“Given that the rating agency optimistically expects general government deficits of 10 per cent of GDP in 2016, 8 per cent in 2017, and 5 per cent in 2018, based on planned fiscal consolidation measures, we think the risk of another downgrade over the stated period is elevated.

“Note that the rating is now conducted on an unsolicited basis as Saudi Arabia terminated its contract with S&P. The MoF also issued a statement expressing its disagreement with the rating action,” Saliba highlighted. - TradeArabia News Service




Tags: Saudi Arabia | S&P | Foreign currency | BofAML |

More Finance & Capital Market Stories

calendarCalendar of Events

Ads