Saudi economic outlook revised to negative from stable
Saudi Arabia awaits a negative economic outlook as a credible rating agency predicts the kingdom would face a huge budget deficit this year mainly because of increasing debts and falling international oil prices.
The Fitch Ratings revised Saudi economic outlook to negative from stable, saying that the government in Riyadh would face a budget deficit of about $90 billion in 2020, nearly 13 percent of its gross domestic products (GDP).
The figure is nearly three times the budget deficit recorded in 2019 and reflects a deep reduction in normal oil revenues of Saudi Arabia, the largest oil exporter in the world.
The rating agency said Saudi Arabia’s sovereign net foreign assets would decline to 60% of GDP by 2022 from about 72% of GDP in 2019 mainly because the kingdom has been issuing a huge amount of debt while repeatedly tapping its sovereign wealth fund to shore up its economy.
Reports earlier this month showed that Saudi Arabia’s giant oil company Aramco had lost almost $10 billion in net profits in the third quarter this year as international demand for oil kept stumbling because of the spread of the coronavirus pandemic.
Aramco, the main source of revenues for the Saudi government, was listed in the local Saudi stock market last year as the government hoped to raise billions of dollars it needed to advance a series of ambitious programs to diversify the economy.
However, Saudis have struggled to prevent a fall in the value of Aramco shares by funding a guaranteed dividend payment scheme which many believe would become even costlier in future if oil prices continue to stagnate.
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