(Bloomberg) — Saudi Arabia’s credit ranking was affirmed by S&P Global Ratings as the kingdom recovers faster than expected from the biggest attack ever on its oil industry.
S&P kept the sovereign assessment at A-, four levels above junk and on par with Malaysia and Malta. The outlook remains stable, according to a statement on Friday.
“We expect Saudi Arabia to redouble its efforts to secure key oil production and processing facilities, increase storage capacity, and enhance attempts to develop Red Sea export routes that would help avoid the volatile Arabian Gulf,” S&P said.
Shaken by the worst disruption of crude output in history, the kingdom is quickly reviving production, with top officials suggesting the strikes had “zero” impact on the economy and revenue. Still, the attacks this month threw into doubt Saudi Arabia’s role as an anchor of stability in global energy markets.
Since then, Aramco has been working flat out to restore capacity, while maintaining normal supplies to customers by tapping inventories and ramping up other fields.
Saud Arabia’s real GDP will contract by about 0.4% this year, driven mainly by a fall in oil production tied to the OPEC deal and the attacks, S&P said. The rating company expects real GDP to rebound to 2.3% on average over 2020-2022.
Despite the turnaround, Saudi Arabia’s public finances remain under pressure as it’s relied on spending to stimulate a sluggish economy. The International Monetary Fund warned that the kingdom needs a tighter fiscal policy to safeguard its budget in case of a decline in oil prices. Most forecasts project this year’s deficit far above Saudi Arabia’s target of 4.2% of gross domestic product.
“There will likely be a wait for clarity on the speed of restoration of the kingdom’s oil capacity and output before any rating action,” Bilal Khan, senior economist for Middle East, North Africa and Pakistan in Dubai, said before S&P’s announcement.