Saudi Arabia’s rating upgraded by Moody’s to Aa3

The Kingdom of Saudi Arabia's flag

Moody’s Ratings upgraded Saudi Arabia's long-term local and foreign currency issuer and senior unsecured ratings to Aa3 from A1. The outlook has been changed to stable from positive.

The upgrade reflects our assessment that economic diversification has continued to progress and the momentum will be sustained. Continued progress will, over time, further reduce Saudi Arabia's exposure to oil market developments and long-term carbon transition.

In addition, the recent fiscal space exercise and recalibration and reprioritisation of diversification projects – which will be regularly reviewed – will provide a more conducive environment for sustainable development of the kingdom's non-hydrocarbon economy and help preserve the relative strength of the sovereign's balance sheet. Alongside these improvements, the Aa3 rating takes into account institutional challenges in particular regarding the concentration of power and decision-making which can impair policy effectiveness in our view.

However, Moody’s said it expects the private sector GDP outside of the oil and gas industry to continue expanding by about 4% to 5% in the coming years, which is among the highest in the Gulf region.